13 May 2009
Issuance of Commonwealth Government Securities
This notice provides details of planned issuance of Commonwealth Government Securities by the Australian Office of Financial Management (AOFM) on behalf of the Australian Government over the remainder of the current financial year (that is, the period to end-June 2009) and during the 2009-10 financial year (1 July 2009 to 30 June 2010).
Over the remainder of the current financial year, Treasury Bond tenders will be held each Wednesday and Friday, with the exception of Friday, 26 June 2009. A tender will not be held on 26 June due to the proximity to the end of the financial year. The face value amount offered at each tender will be up to $800 million.
- The total face value amount of Treasury Bonds on issue at end-June 2009 will be around $79 billion, an increase of around $30 billion on end-June 2008.
Treasury Bond issuance in 2009-10 is expected to be around $60 billion. After accounting for maturities of $6.0 billion this represents a net increase of $54 billion in the face value amount of Treasury Bonds on issue.
- The face value amount of Treasury Bonds on issue at end-June 2010 is projected to be around $133 billion.
Up to 80 Treasury Bond tenders are expected to be held in 2009-10, with the face value amount offered at each tender in the range $700 million to $1 billion. Tenders will continue to be held on Wednesdays and Fridays, with details of the bond lines and amounts to be offered in a particular week announced at noon on the Friday of the preceding week.
The bulk of issuance will be into existing bond lines with maturities up to 12 years. This will enhance the liquidity and efficiency of the Treasury Bond market by increasing the size of individual bond lines. Issuing over a range of bond lines with different maturities will also help the management of the debt portfolio by ensuring that the maturity of the debt is not unduly concentrated but spread over a period of years.
It is planned to issue a new Treasury Bond line maturing in 2022 in the second half of the financial year. Issuance of this bond line will support the operation of the ten-year Treasury Bond futures contracts.
Consideration will be given to issuing longer-dated Treasury Bonds and resuming issuance of Treasury Indexed Bonds. The issuance of such bonds would assist portfolio management by widening the range of available debt instruments, diversifying risk and potentially tapping additional sources of investor demand.
- Issuance of longer-dated Treasury Bonds could also strengthen the overall functioning of Australian financial markets by providing pricing benchmarks for other long-dated instruments, such as public and private infrastructure bonds.
- Similarly, resumption of indexed bond issuance could assist in the debt financing of long-term infrastructure, since Treasury Indexed Bonds would serve as both a pricing benchmark and a risk management tool. Indexed financing can be attractive for those infrastructure projects whose revenues are linked to inflation. In addition, indexed instruments have advantages for investors with inflation-linked liabilities.
The AOFM will consult market participants over coming weeks about issuance of longer-dated Treasury Bonds and Treasury Indexed Bonds.
Prior to the start of each quarter the AOFM will provide an indication of expected bond issuance over the forthcoming quarter.
Treasury Notes are a short-term discount security primarily used for within-year financing.
Over the remainder of the current financial year, it is planned to conduct a tender for the issue of Treasury Notes each week. Treasury Note tenders will continue to be held on Thursdays, with details of the tenors and amounts to be offered announced the previous day at 4.00 pm. The total face value amount of Treasury Notes on issue at end-June 2009 will be around $17 billion.
A similar volume of Treasury Notes is expected to be on issue at end-June 2010. Treasury Notes will therefore make no major contribution to overall funding for the financial year as a whole. However, the volume of Treasury Notes on issue will vary over the course of the year, depending on the flows of Australian Government receipts and expenditures. It is currently estimated that the volume of Treasury Notes on issue could peak at between $35 billion to $40 billion during 2009-10.
It is planned to keep at least $10 billion of Treasury Notes on issue at all times so as to maintain a liquid market.
Foreign currency issuance
It is not planned to undertake any issuance in 2009-10 denominated in currencies other than Australian dollars.