Australia sells record A$13b in bonds

Sydney

AUSTRALIA sold a record A$13 billion (S$11.7 billion) of bonds, joining a global borrowing spree as governments compete for funding to combat a coronavirus-driven economic slowdown.

The November 2024 debt was sold at a yield-to-maturity of 0.47 per cent, and received A$25.8 billion of bids, the Australian Office of Financial Management (AOFM) said. The amount raised smashes the previous record of an A$11 billion sale in 2017.

"It looks like they want to get a really big start to the funding programme, and the deal does look relatively cheap," Chris Rands, portfolio manager at Nikko Asset Management Ltd in Sydney, said before the final sales result. "You wouldn't get a deal like this under normal conditions."

The government passed a record A$130 billion jobs-rescue plan this month, and the central bank has pledged to buy debt and control the yield of the three-year bond to bring down borrowing costs. Australia joins a throng of governments and companies that are selling bonds at breakneck speed as the deadly virus forced swathes of company closures and job losses.

The South Pacific nation could sell more than A$250 billion of bonds in the coming 15 months to fund its virus-combating measures, according to estimates from Australia & New Zealand Banking Group Ltd. That is almost half of the A$592.3 billion of government debt outstanding as at April 9.

The key to Wednesday's record bond sale is the pricing. The yield on the newest security is 11 basis points higher than what the April 2024 sovereign bond is trading at. It is also about 19 basis points more than the three-year bond yield, which the Reserve Bank of Australia has pledged to control at the policy cash rate of 0.25 per cent.

"The amount the AOFM needs to raise to finance the government's fiscal initiatives is significant over the coming months," said Prashant Newnaha, senior strategist at TD Securities in Singapore. The deal "was huge and required", he added.

Australia is seeking to stave off its first recession in almost 30 years, with the government expecting the jobless rate to soar to 10 per cent in the current quarter.

Other governments in the region are also seeking funds to implement their own stimulus. Indonesia raised a record US$4.3 billion from the US dollar bond market last week to finance relief measure. BLOOMBERG