Australia May Boost Bond Sales at Record Pace to Fund Stimulus

(Bloomberg) -- Australia could boost government borrowing at a record pace this quarter as it seeks to fund an unprecedented A$320 billion ($194 billion) in stimulus plans to counter the impact of the coronavirus outbreak on the economy.

The government’s funding arm said Friday it expects to auction A$5 billion in most weeks this quarter, and that it is likely to also raise money via syndicated offerings on top of that.

With 12 full weeks left in the second quarter, that indicates potential gross bond issuance of $A60 billion or more would be feasible, well above the peak quarterly level of A$35.9 billion in the first quarter of 2017. That would also put the government in reach of the record A$103 billion in issuance of coupon-bearing debt that was achieved in the fiscal year ended June 30, 2017.

The government sold A$15.7 billion in long-term notes last quarter. An increase to A$60 billion or so would be the fastest acceleration in borrowing in nominal terms, based on data from the Australian Office of Financial Management going back to 1982. Back in the first quarter of 2009 the government raised issuance to A$10.15 billion, from A$2.15 billion in the final three months of 2008.

The AOFM received strong demand Friday at its first auction of longer-term notes. The offering of A$600 million in May 2030 securities saw a bid-to-cover ratio of 4.09, the most for those bonds since February.

The Reserve Bank of Australia has bought A$27 billion in face value of federal government bonds and A$5 billion of notes issued by state and territory governments, since it started purchases on March 20 to hold down borrowing costs across the economy.

©2020 Bloomberg L.P.