5 November 2009
Issuance of Commonwealth Government Securities over the Remainder of the Current Financial Year
On 2 November 2009 the Australian Government released updated economic and budget forecasts. This notice provides details, consistent with those forecasts, 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, to end-June 2010).
Treasury Bond issuance over the remainder of 2009-10 is expected to be between $32 billion to $34 billion. Issuance to date in 2009-10 totals $18.2 billion in face value terms.
- Tenders will continue to be held on most 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.
- No Treasury Bond tenders will be held between mid-December 2009 and mid-January 2010.
It is planned to issue a new Treasury Bond line maturing in 2022 in the last quarter of the financial year.
Treasury Indexed Bonds (TIBs)
In September 2009 issuance of TIBs was resumed after a period of six years with the syndicated issue of $4 billion of a new 3% 20 September 2025 TIB.
Further issuance of TIBs will be undertaken by tender over the remainder of 2009-10. TIBs issuance over the remainder of 2009-10 is expected to total between $1.5 billion to $2.0 billion in nominal face value terms.
- Tenders are planned to be held in each remaining month of the current financial year, with the exception of December 2009.
- Tenders will be held on Mondays (generally around the middle of the month) with details of the bond lines and amounts to be offered announced at noon ten calendar days prior to the tender.
- In deciding upon the bond lines and amounts to be offered at tender the AOFM will take into account feedback from financial market participants.
The first tender will be held on Monday, 16 November 2009. This tender will be for the issue of $300 million (original face value amount) of the 4% 20 August 2020 TIB.
- Details of the tender will be confirmed at noon on 13 November 2009.
Legislation is currently before Parliament which would make Commonwealth Government Securities eligible for exemption from non-resident interest withholding tax under section 128F of Income Tax Assessment Tax 1936. The legislation was passed by the House of Representatives on 29 October 2009 and is expected to be considered by the Senate during the Parliamentary sittings scheduled for the period 16 November to 26 November 2009. The Coalition has announced it supports passage of the legislation.
- The first coupon payment in connection with the 20 August 2020 TIBs planned to be issued on 16 November 2009 is scheduled to occur on 20 February 2010. This and subsequent coupon payments will not be subject to non-resident interest withholding tax if the legislation to make Commonwealth Government Securities eligible for exemption from non-resident interest withholding tax receives Royal Assent before that date.
Unlike tenders for Treasury Bonds which are conducted on a multiple price basis (that is successful bidders pay the price they bid), tenders for the issue of TIBs will be conducted on a single price basis (that is, all successful bidders will pay the same price). The issue price at TIBs tenders will equate to the bid yield that clears the amount offered.
- The uniform price format is being used for TIB tenders because the secondary market for TIBs is not as liquid as for Treasury Bonds, which currently makes the pricing of TIBs more difficult.
Treasury Notes are not expected to make a major contribution to overall funding for the financial year as a whole. The volume of Treasury Notes on issue at end-June 2010 is expected to be similar to that on issue at end-June 2009 (around $17 billion).