Government woos Canada, Middle East in search for new investors
The government's financing arm is wooing potential investors in Canada and the Middle East as it seeks to diversify its 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 also revisited South America, a region it had not been to for some years.
The AOFM 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 on offer 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 in June 2013, amid a low interest rate environment and as the Australian dollar weakened. The strength of the Australian dollar compared with the yen earlier this year also led to a pull-out by some Japanese investors between December 2012 and April 2013, the AOFM 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 rates strategist 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 financial year. Treasury-indexed bonds totalled $2.25 billion for the year.
The agency's funding task has risen for this financial year. It said last week it expected to raise $70 billion in gross terms for Treasury bonds, after federal Treasurer Joe Hockey announced an $8.8 billion grant to the RBA. With maturities of $23 billion, the net issuance for 2013-14 would amount to $47 billion.
The agency is expected to raise between $4 billion and $5 billion in Treasury indexed bonds.
As of Friday, the total government securities on issue stood at $289 billion. The federal government recently flagged a lifting of the debt ceiling from $300 billion to $500 billion.