Australian Government, the Australian Office of Financial Management

DATE: 15 May 2002


Treasury Notes are short-dated debt instruments issued by the Commonwealth Government through the Australian Office of Financial Management (AOFM).

In the Budget Papers released last night it was stated that there was to be a number of changes to issuance arrangements for Treasury Notes (Statement 7 of Budget Paper No. 1, pages 7-4 to 7-5). This notice provides further details in respect of these changes.

Currently, there is a relatively regular programme of Treasury Note issuance, with a minimum volume of $3 billion in Treasury Notes outstandings maintained at all times, regardless of Commonwealth funding needs. In addition Treasury Note issuance is concentrated into fixed maturity dates which broadly coincide with peak Commonwealth revenue collection dates which occur in the months of January, April, July and October each year.

Following a review of current issuance arrangements for Treasury Notes, which included consultations with financial market participants, it has been decided that future Treasury Note issuance will be limited to that required for Commonwealth within-year funding purposes. (The Commonwealth's within-year financing requirement arises because the day-to-day timing of the Commonwealth's receipts does not match the disbursement pattern of its outlays.) This is expected to result in less regular issuance of Treasury Notes than currently. There could also be extended periods when there will be no outstanding Treasury Notes on issue.

It has also been decided that Treasury Notes issuance will no longer be concentrated into fixed maturity dates. In future Treasury Notes will be issued to dates consistent with the most efficient cash management outcomes for the Commonwealth.

Treasury Notes will continue to be offered by tender. As is presently the case, only bids submitted electronically by members of the Reserve Bank Information and Transfer System (RITS) in accordance with the RITS Regulations and Conditions of Operation will be accepted.

Currently the Reserve Bank of Australia (RBA) issues an announcement at 4:00 pm each Tuesday indicating whether a tender for Treasury Notes will be conducted the following day (i.e. Wednesday), and if so, announces details concerning the tender. In future there will be no fixed day of the week for the conduct of Treasury Note tenders, i.e. the Commonwealth will reserve the right to issue Treasury Notes on any business day of the week. Notice of a Treasury Note tender will be made at 4.00 pm, the business day prior to the day the tender is to be conducted. On the day of the tender, bidding will close at 12:15 pm and tender results will be announced after thirty minutes, i.e. at 12:45 pm.

Processes for the future conduct of Treasury Note tenders are summarised as follows:

Business Day Prior to Tender

4:00 pm Notice of Treasury Note tender

Day of Tender

12:15 am Closure time for bidding

12:45 pm Announcement of results

As a result of the new arrangements the RBA will no longer issue an announcement at 4:00 pm each Tuesday in respect of Treasury Note issuance. Announcements concerning Treasury Note tenders will only be issued when a tender is planned.

The Commonwealth is expected to have sufficient surplus liquidity over the remainder of the current financial year (i.e. the period to end-June 2002) to finance timing mismatches between receipts and outlays such that further Treasury Note issuance will not be necessary this financial year.

In 2002-03 the Commonwealth is expected to have a within-year financing requirement sufficient to necessitate issuance of Treasury Notes over the course of 2002-03. At this stage the expectation is that the next issue of Treasury Notes will occur around September/October 2002.

The new arrangements are expected to provide for enhanced flexibility in the management of the Commonwealth's within-year cash flows as well as reduce the grossing up of the Commonwealth's balance sheet and the need to invest surplus funds.

15 May 2002

Mr Michael Allen
(02) 6263 1100

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