Canberra issues first 20-year bond

The government's financing arm has taken a key step towards establishing a market to support long-term borrowing by infrastructure projects, issuing the longest-dated bond ever.

The Australian Office of Financial Management on Tuesday concluded a new 20-year bond issue, raising $5.9 billion from investors.

The deal is significant because until now the government had only nominal issued bonds with maturity of up to 16 years.

ANZ chief economist Warren Hogan said the size of the 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 yield to maturity of 4.86 per cent was a "pretty reasonable" cost of borrowing, he said.

Unlike peers overseas, Australia lacks a market for bonds with a maturity of several decades, which are often used to fund big infrastructure projects. It is hoped that once there is a market for long-dated government paper, private companies will have a benchmark for issuing their own long-dated bonds, which are also likely to be sought by pension funds.