Australia Sells A$19 Billion of Bonds, Breaking Record Again

(Bloomberg) -- Australia sold A$19 billion ($12.3 billion) in new 10-year sovereign bonds, a second record-breaking sale in as many months, underscoring appetite for debt in one of the highest-yielding markets among Group-of-10 nations.

The December 2030 bond was sold at a yield of 1.025%, according to the Australian Office of Financial Management said. It received A$53.5 billion of bids, also a record.

“People just want yields from high quality bonds wherever they can get them,” said Chris Weston, head of research at Pepperstone Group in Melbourne. Along with China tensions, quantitative easing, yield-curve controls and talk of negative rates “it’s hard not be a bond bull right now,” he said.

The strong demand indicates that Australia is well-positioned to fund its record A$130 billion stimulus measures, at a time when governments worldwide are embarking on spending sprees. Massive bond purchases by the nation’s central bank, which have so far topped A$51 billion, also acts as a backstop for the debt market at a time when yields have plunged everywhere.

The prior record for a syndicated Australian bond sale was A$13 billion of November 2024 bonds last month. Including Wednesday’s sale, the government has sold A$55.6 billion of Treasury bonds so far this quarter, based on data from the financial management office going back to 1982.

Australia isn’t alone.

There’s a global surge in bond supply and investors are lining up to own them. On Tuesday, the U.K. raised 12 billion pounds ($14.7 billion) in 10-year debt receiving over 82 billion pounds of orders, a new record. The U.S. also sold an unprecedented $32 billion in new 10-year notes at auction, which saw strong bidding metrics.

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Australia’s 10-year bonds are among the best on offer among high-grade government debt, offering a pick up for over 25 basis points above Treasuries. What’s more, for investors from Japan who prefer to currency hedge the yields, the pick-up over U.S. paper is closer to 35 basis points.

Japanese investors, hedge funds and central banks would likely have numbered among the buyers for the new bond, according to Andrew Ticehurst, strategist at Nomura Holdings Inc.

“For Japanese investors, Aussie dollar bonds have become much more attractive in the past month or two as hedging costs have fallen,” he said. “Investors have also been pushed further along the curve in search for yield with the front-half of the curve completely locked up with yield-curve control.”

The Reserve Bank of Australia has targeted a 0.25% yield for three-year government bonds as part of its quantitative easing program.

Australia and New Zealand Banking Group Ltd., Citigroup Global Markets Australia Pty Ltd., Commonwealth Bank of Australia and UBS AG were the joint-lead managers for the issue on Wednesday.

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