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Australia plans its first ever 30-year bond offering next month
[SYDNEY] The Australian government is planning to sell its first-ever 30-year bond next month, according to the head of the nation's funding arm.
With the government's debt pile set to swell to about A$500 billion (S$511 billion) in the current fiscal year and the yield curve already beyond 20 years, "the time is right" to proceed with an extension out to three decades, Australian Office of Financial Management chief executive officer Robert Nicholl said at an event in Sydney on Tuesday.
He declined to provide details on potential pricing and volume for the bank-managed transaction.
With the number of top-rated sovereign borrowers dwindling, investors have lapped up Australian issuance even as ongoing budget deficits caused issuance to balloon.
The AOFM has tapped into demand for longer-dated paper by offering more extended maturities over recent years. That's enabled it to both reduce the government's refinancing risks and to take advantage of borrowing costs that are near record lows. Now, Australia's longest outstanding nominal bond is a June 2039 security that it first issued back in Oct 2015, while it also has an inflation-linked note due in Aug 2040.
"We are expecting to be able to issue a meaningful volume to meet anticipated broad interest and to establish a maturity of clear benchmark size," Mr Nicholl said.
"We are confident that domestic investor support and the so-called 'global search for yield' that has underpinned an increased demand for duration will remain sufficient for us to establish a 30-year Australian yield curve."
The nation's 2039 note yielded 2.85 per cent as of 3:34pm on Tuesday in Sydney. The rate on the benchmark 30-year security in the US is currently 2.38 per cent.