Canberra issues 20-year paper to raise $5.9b from investors
The government's financing arm has taken a step towards building a market to support long-term borrowing by infrastructure projects, issuing its longest-dated bond.
The Australian Office of Financial Management on Tuesday concluded a new 20-year bond issue, raising $5.9 billion from investors. Until now, the government has only nominal issued bonds with maturity of up to 16 years.
ANZ chief economist Warren Hogan said the size of issue showed strong demand for government debt from investors, and the deal could help develop the market for long-dated private sector debt, often used to fund infrastructure.
"The government borrowed almost $6 billion from the price sector in one hit, which is pretty phenomenal." The yield to maturity of 4.86 per cent was a "pretty reasonable" cost of borrowing, he said.
Unlike overseas, Australia lacks a market for bonds with a maturity of several decades, which are often used to fund large infrastructure projects. It is hoped once there is a market long-dated government paper, private companies will have a benchmark for issuing their own long-dated bonds.