Government broadens borrowing base
The Australian Office of Financial Management said about two-thirds of its investor meetings in the 2012-13 financial year were with new contacts. The government agency revisited South America, a region it had not been to for some years.
The office said in its annual report that offshore demand for government debt remained strong, coming in at just under 70 per cent of all holdings at the end of the previous financial year.
Foreign investors continued to be drawn to the government's AAA-credit rating and stable outlook, coupled with the high yields relative to other sovereign debt.
Even so, non-resident holdings of bonds fell from a high of 78.3 per cent in March last year to 69.4 per cent this June, amid a low interest rate environment and as the Australian dollar weakened.
The strength of the Australian dollar compared to the yen earlier this year, a result of Japan's quantitative easing policy, also led to a pull-out by some Japanese investors between December and April, the office said.
"Given the relatively small decline in non-resident holdings of Australian government bonds over this period, it would suggest there was still considerable offshore buying from other regions, resulting in a take-up of much of the stock released to the secondary market from Japan," the agency said.
Nomura's Martin Whetton said the current Australian-Japanese exchange rate would be less of a barrier to new investments, "with the likely bottoming of policy rates in Australia and the intentions of Japanese investors to diversify their investments".
A total of $54 billion of gross Treasury bonds were issued in the 2012-13 year. Treasury indexed bonds totalled $2.25 billion.
The agency's funding task has risen for this year. It expects to raise $70 billion in gross terms for Treasury bonds, after an $8.8 billion grant to the RBA. With maturities of $23 billion, the net issuance for 2013-14 would amount to $47 billion.
Frequently Asked Questions about this Article…
The Australian government is seeking to diversify its borrowing base to attract more potential investors from regions like Canada and the Middle East. This strategy aims to ensure a stable demand for government debt and to mitigate risks associated with relying on a limited number of investors.
The Australian government is seeking to diversify its borrowing base to attract more potential investors from regions like Canada and the Middle East. This strategy aims to strengthen offshore demand for government debt and maintain a stable financial outlook.
As of the end of the previous financial year, just under 70% of Australian government debt was held by foreign investors. This indicates strong offshore demand for Australian government bonds.
As of the end of the previous financial year, just under 70% of Australian government bonds were held by foreign investors, indicating strong offshore demand for these securities.
The weakening of the Australian dollar, along with a low interest rate environment, has led to a decrease in non-resident holdings of bonds from a high of 78.3% to 69.4%. Additionally, the strength of the Australian dollar against the yen earlier this year caused some Japanese investors to pull out.
The weakening of the Australian dollar, along with a low interest rate environment, has led to a decrease in non-resident holdings of bonds from a high of 78.3% to 69.4%. Additionally, the strong Australian dollar compared to the yen earlier this year caused some Japanese investors to pull out.
Japan's quantitative easing policy strengthened the Australian dollar compared to the yen, leading to a withdrawal by some Japanese investors between December and April. However, other regions continued to buy, offsetting much of the Japanese sell-off.
Japan's quantitative easing policy strengthened the Australian dollar against the yen, leading to a withdrawal of some Japanese investors from Australian government bonds between December and April.
During the 2012-13 financial year, the Australian government issued a total of $54 billion in gross Treasury bonds and $2.25 billion in Treasury indexed bonds.
During the 2012-13 financial year, the Australian government issued a total of $54 billion in gross Treasury bonds, along with $2.25 billion in Treasury indexed bonds.
For the 2013-14 year, the Australian government expects to raise $70 billion in gross terms for Treasury bonds. After accounting for maturities of $23 billion, the net issuance is projected to be $47 billion.
The Australian Office of Financial Management aims to raise $70 billion in gross terms for Treasury bonds this year, following an $8.8 billion grant to the Reserve Bank of Australia. With $23 billion in maturities, the net issuance for 2013-14 is expected to be $47 billion.
The AAA-credit rating, along with a stable economic outlook, makes Australian government bonds attractive to foreign investors. This high credit rating assures investors of the government's ability to meet its financial obligations, thus maintaining strong demand for its bonds.
Foreign investors are drawn to Australian government bonds due to the country's AAA-credit rating, stable outlook, and relatively high yields compared to other sovereign debt.
Martin Whetton from Nomura suggests that the current Australian-Japanese exchange rate will be less of a barrier to new investments. This is due to the likely bottoming of policy rates in Australia and Japanese investors' intentions to diversify their investments.
According to Nomura's Martin Whetton, the current Australian-Japanese exchange rate is less of a barrier to new investments. With the likely bottoming of policy rates in Australia and Japanese investors' intentions to diversify, there may be renewed interest in Australian government bonds.
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