10 November 2010
Issuance of Commonwealth Government Securities
The AOFM has reviewed and adjusted its planned issuance of Commonwealth Government Securities during the 2010-11 financial year (that is, 1 July 2010 to 30 June 2011). The previous issuance plans were announced in Operational Notice No 3/2010 on 12 May 2010 following the presentation of the Australian Government’s Budget. The review takes account of developments since then, including the updated forecasts released in the Government’s Mid-Year Economic and Fiscal Outlook, released on 9 November 2010.
These developments include:
- a smaller Budget deficit outcome for 2009-10 than was anticipated in May 2010;
- increased contributions to Budget funding in 2010-11 from transfers from the Nation Building Funds and the International Monetary Fund;
- changes in the estimated within-year patterns of Government receipts and expenditures will allow the Government’s daily cash balances to be managed with a lower volume of short-term assets in the final months of 2010-11 than previously assumed;
- the Budget underlying cash deficit for 2010-11 is now forecast to be higher ($41.5 billion) than at Budget time ($40.8 billion).
As a result, the AOFM has revised down slightly its planned issuance in 2010-11 of Treasury Bonds, Treasury Indexed Bonds and Treasury Notes. Total bond issuance in 2010-11 is now expected to be between $53 billion and $58.5 billion, compared with around $60 billion projected at Budget time.
Treasury Bond issuance in 2010-11 is now expected to be between $50 billion and $55 billion in face value terms. Issuance to date in 2010-11 has totalled $21.2 billion (face value).
In May 2010 it was announced that issuance in 2010-11 would include new Treasury Bond lines maturing in 2014, 2016, 2023 and 2025. New lines maturing in 2014 and 2016 have now been issued.
Following feedback from bond market participants, it has been decided to defer issuance of a new Treasury Bond maturing in 2023 until 2011-12, and instead issue in 2010-11 a new Treasury Bond maturing in 2018.
Subject to market conditions, it is still planned to issue a new Treasury Bond maturing in 2025 in 2010-11.
Tenders for the issue of Treasury Bonds will continue to be held most weeks on Wednesdays and Fridays. Details of the bond lines and amounts to be offered in a particular week will continue to be announced at noon on the Friday of the preceding week.
Treasury Indexed Bonds
Treasury Indexed Bond issuance in 2010-11 is now expected to be between $3 billion and $3.5 billion (face value). Issuance to date in 2010-11 has totalled $1.9 billion (face value).
Tenders for the issue of Treasury Indexed Bonds are planned to be held in each remaining month of the financial year, with the exception of December 2010.
Treasury Notes are short-term debt securities used primarily to meet within-year funding flows. Issuance decisions are made weekly and depend on the Government’s projected daily cash position for the weeks ahead. At 30 June 2010 the volume of Notes on issue was $11 billion. The volume on issue at the end of 2010-11 is now projected to be broadly comparable to this, in which case Treasury Notes will not contribute substantially to overall funding for the financial year as a whole.