Australia to Sell A$21 Billion of Bonds, Smashing Record

(Bloomberg) -- Australia sold A$21 billion ($15.1 billion) in new 11-year sovereign bonds, its third record-breaking sale this year as global investors pile into the nation’s debt.

The 1% November 2031 bonds priced with a yield of 1.055% according to the Australian Office of Financial Management. More than A$66 billion of bids were received, which also was a record.

The overwhelming demand underscores enormous investor appetite for yield as options shrink around the world with policy makers slashing rates to cope with the coronavirus pandemic. Australia’s debt is the second-highest yielding among Group-of-10 nations, and is underpinned by the central bank’s yield-curve control policy.

“There’s a combination of things driving this -- the RBA consistently saying rates will remain on hold, its term-funding facility and the yield pick up you can get with great carry for offshore investors,” said Prashant Newnaha, senior strategist at TD Securities.

The sale follows a record breaking A$13 billion offering in April for a 2024 bond, and A$19 billion worth of 2030 debt sold a month later. In order to mitigate the impact of virus lockdowns, a raft of stimulus measures have been announced in Australia, including a historic A$130 billion jobs rescue plan.

Bond sales, needed to fund the plans, have skyrocketed. Wednesday’s sale brings the amount of nominal bonds Australia has sold this calendar year to over A$180 billion, compared with less than A$52 billion in all of 2019.

“For Japanese, European and U.S. investors, Australian government bonds offer similar FX-hedge yields as Spain,” said Duangjai Samranvedhya, deputy chief investment officer at Jamieson Coote Bonds Pty in Singapore. “The only G-10 country with higher yield is Italy, so Australian AAA government bonds offer very attractive yields.”

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