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The Star
3 days ago
- Business
- The Star
Buyer fatigue creeps into Australian bonds market
Yields at debt sales have risen closer to levels seen in the secondary market, with the rolling average gap between them at the tightest level since October. — Bloomberg SYDNEY: Australia's bond market is showing early signs of stress from the nation's massive borrowing plan this year, but the effect is being obscured by strong demand from foreign investors diversifying from US treasuries. Yields at debt sales have risen closer to levels seen in the secondary market, with the rolling average gap between them at the tightest level since October, according to a Bloomberg analysis of Australian Office of Financial Management (AOFM) data. A gauge of demand for the nation's government bonds has also fallen from this year's peak, but it remains above a three-year average. Slowing demand reflects the difficulty among investors to absorb fresh debt with the AOFM targeting bond sales of A$150bil (US$98bil) in the financial year through June 2026, up 50% from the last financial year. It also risks pushing up borrowing costs for local authorities looking to fund key projects such as a new train line in Sydney and the 2032 Olympics in Brisbane. 'The step-up in this year's increased issuance target is having some impact,' said Kenneth Crompton, head of rates strategy at National Australia Bank in Sydney. 'There is some fatigue. I'm not seeing this as the start of a concerning trend though,' he said, citing inflows from global investors seeking diversification. Australian bonds have benefitted from investors diversifying from treasuries on concern over President Donald Trump's policies. Buyers from Japan as well as Taiwanese life insurers have been snapping up the Antipodean debt. Nearly half of the A$16bil of government bonds maturing in 2036 were bought by foreign investors last month via a syndicated issuance, the highest allocation through such a sale since 2022. Demand from offshore investors has also seeped into credit markets, spurring record issuance of Australian dollar-denominated notes by foreign issuers, known as Kangaroo bonds, in the first half of the year. 'There are issuers keen to diversify,' said Oliver Holt, head of debt syndicate and IG origination for Asia ex-Japan at Nomura Holdings Inc. For trading, the Australian dollar credit market is much deeper than local currency markets in Singapore, Hong Kong or Japan, he said. Australia sold A$1.2bil 2035 bonds yesterday and is due to issue A$1.15bil more in the remaining week. Investors will be monitoring the demand for debt at these auctions after the Reserve Bank of Australia cut its key rate on Tuesday and signalled a 'couple more' reductions to achieve its latest forecasts. Meanwhile, the amount of outstanding local currency government bonds has already swelled by A$35.1bil in the first seven months of the year, based on AOFM data. That's a record except for during the pandemic in 2020 and 2021. 'We're taking a step back to think about what it all means for the market and how much of this supply will be fully absorbed,' said Jessica Ren, an investment manager at Yarra Capital Management, who recently bought Australian government and state debt. 'We can only observe that over time.' — Bloomberg
Bloomberg
4 days ago
- Business
- Bloomberg
Buyer Fatigue in Australian Bonds Masked by Foreign Purchases
Australia's bond market is showing early signs of stress from the nation's massive borrowing plan this year, but the effect is being obscured by strong demand from foreign investors diversifying from Treasuries. Yields at debt sales have risen closer to levels seen in the secondary market, with the rolling average gap between them at the tightest level since October, according to a Bloomberg analysis of Australian Office of Financial Management data. A gauge of demand for the nation's government bonds has also fallen from this year's peak, but it remains above a three-year average.
Bloomberg
02-07-2025
- Business
- Bloomberg
Australia Mulls Lowering Ultra-Long Bond Sales Amid Volatility
Australia's debt manager is considering scaling back its issuance of ultra-long bonds as rising yields make funding more expensive. The Australian Office of Financial Management plans to issue around A$150 billion ($99 billion) worth of bonds this year as funding officials navigate one of the steepest yield curves in developed markets. Adding to the pressure: Australia's longer-term bond yields have become increasingly sensitive to gyrations in the US bond market, which has been volatile this year due to fears over the fiscal deficit and shifting bets on rate cuts.
Mint
03-06-2025
- Business
- Mint
Australian Bond Auction Draws Weakest Demand in Six Years
(Bloomberg) -- An auction of 12-year Australian government bonds drew the weakest demand in about six years amid higher domestic corporate issuances and a period of outperformance. The bid-to-cover ratio — a key gauge of interest — at the auction of A$1.2 billion ($775 million) worth of bonds maturing in April 2037 was 1.98 on Tuesday, according to the Australian Office of Financial Management. That was the lowest since July 2019 for notes with residual maturities of 10 to 12 years, according to Bloomberg calculations. The weak demand comes as Commonwealth Bank of Australia, ING Groep NV and BPCE SA also tapped Australian markets on Tuesday. Recent gains in sovereign bonds also weighed on the sale. Australia's financial year is also coming to an end after a heavy year of issuance so dealers may also be stepping back as they close their books, said Kit Lowe, an analyst at InTouch Capital Markets Pte. Ltd. in Sydney. As a sale of 2031 notes due later this week is smaller than Tuesday's auction on a risk-adjusted basis, 'I would expect demand to recover,' said Lowe. The April 2037 note forms part of Australia's 10-year bond futures basket, the main avenue for investors to trade the nation's benchmark debt. The cash notes have outperformed peers this quarter amid fiscal issues in the US and a dovish tilt from the Reserve Bank of Australia, as it continues to cut interest rates. The spread between benchmark 10-year bond and its Treasury counterpart fell to the lowest since January on Tuesday. More stories like this are available on
Yahoo
28-03-2025
- Business
- Yahoo
Australia's Bond Demand Gauge Relative to Supply Hits Record Low
(Bloomberg) -- The Australian rates market is signaling that the demand for the nation's sovereign bonds has slumped to a record low relative to supply, underscoring investor concern over heavy debt issuance. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Why Did the Government Declare War on My Adorable Tiny Truck? How SUVs Are Making Traffic Worse Trump Slashed International Aid. Geneva Is Feeling the Impact. These US Bridges Face High Risk of Catastrophic Ship Strikes The spread between 10-year interest-rate swaps and similar-tenor bond futures slid to negative 14.75 basis points this week, the lowest in Bloomberg-compiled data going back to 1998. That gap is often seen as a gauge of the demand for debt as swaps and bond futures typically move in tandem, unless there is a bond-supply risk. The nation's 10-year yields rose to the highest in a month after the Australian Office of Financial Management said it plans to issue about A$150 billion ($94.4 billion) of government bonds in the 12 months ending June 2026. That's higher than the revised projection of A$100 billion for the current fiscal year. Increasing government bond supply into fiscal year ending June 2026 has been helping put downward pressure on spreads, said Ken Crompton, head of rates strategy at National Australia Bank Ltd. 'The combination of flows and higher issuance points to spreads remaining tight,' he said, adding that 'The swap spread curve will thus remain inverted.' Business Schools Are Back Google Is Searching for an Answer to ChatGPT A New 'China Shock' Is Destroying Jobs Around the World The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? How TD Became America's Most Convenient Bank for Money Launderers ©2025 Bloomberg L.P. Sign in to access your portfolio
