AGS Investor Chart Pack - MYEFO 2021-22 Update - Australian Office of Financial Management - Budget 2020-21 Update
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AGS Investor Chart Pack - MYEFO 2021-22 Update
Australian Office of Financial Management January 2022
0
Australia’s budget balance
Underlying cash balance per cent of GDP
The underlying cash balance (UCB) in 2020-21 was a deficit of 6.5 per cent of GDP (Budget 2021-22 forecast was 7.8 per cent). The deficit in 2021-22 is
expected to be 4.5 percent compared to 5 per cent forecast at Budget 2021-22. This improvement has occurred despite the COVID Delta variant
lockdowns in early 2021-22. The deficit is expected to improve across the forward estimates to 2.3 per cent of GDP in 2024-25.
Source: Treasury – MYEFO 2021-22
1
Comparison of government budget balances
2021 to 2024 (forecast) per cent of GDP for G7 and Australia
The Australian Government entered the pandemic with the budget in balance and is managing the impact of the pandemic from the position of
having started the task with a strong balance sheet. Post-crisis, the balance sheet position is forecast to continue exhibiting relatively low net debt
by global standards (see Charts 3 and 4).
% %
2 2
0 0
-2 -2
-4 -4
-6 -6
-8 -8
Australia Germany Canada Japan Italy France UK US
Note: Australian data are for the Australian Government general government sector for financial years 2021-22 to 2024-25
Source: Treasury –MYEFO 2021-22, IMF Fiscal Monitor October 2021.
2Australia’s net debt position
Net debt is forecast to be 30.6 per cent of GDP at end of 2021-22 (light blue bar) and is expected to peak at 37.4 per cent of GDP at the end
of 2024-25, below the 40.9 per cent peak estimated at the 2021-22 Budget. Although net debt has increased since the onset of the
pandemic, net interest payments are expected to remain low (0.7 per cent of GDP over the forward estimates).
Per cent of GDP net debt (LHS) net interest (RHS) Per cent of GDP
40 (Estimates) 1
30 0.75
20 0.5
10 0.25
0 0
-10 -0.25
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
2016-17
2018-19
2020-21
2022-23
2024-25
Source: Treasury – MYEFO 2021-22
3Comparison of government net debt
2021 to 2024 (forecast) for G7 and Australia
Per cent of GDP Per cent of GDP
180 180
160 160
140 140
120 120
100 100
80 80
60 60
40 40
20 20
0 0
Australia Canada Germany United France United States Italy Japan
Kingdom
Note: Australian data are for the Australian Government general government sector for financial years commencing 2021-22. Data for all other countries are for total government and refer to calendar years commencing 2021.
Source: Treasury – MYEFO 2021-22, IMF Fiscal Monitor October 2021
4Australian Government Securities
Three instruments available
Treasury Bonds Treasury Indexed Bonds Treasury Notes
Amount Outstanding Amount Outstanding Amount Outstanding
$778.8 billion $41.2 billion $35.0 billion
28 lines on issue 8 lines on issue 6 lines on issue
Average line size is $27.8 billion Average line size is $5.2 billion Average line size is $5.8 billion
Maturities range from 2022 to 2051 Maturities range from 2022 to 2050 Maturities can range up to 12 months
Gross Issuance 2021-22 (F) Gross Issuance 2021-22 (F)
Around $105 billion Around $5-5.5 billion
Further information
Issuance of Treasury Bonds for 2021-22 has been revised to around $105 billion (of which $44.3 billion has been completed as of 7 January 2022).
A new November 2033 Treasury Bond will be issued by syndication in the final quarter of 2021-22 (subject to market conditions).
Planned issuance of Treasury Indexed Bonds is $5-5.5 billion (of which $4.1 billion has been completed). Two tenders will be held most months.
Regular issuance of Treasury Notes will continue. Weekly issuance volumes will depend on the timing and size of government receipts and outlays
and the AOFM’s assessment of its cash portfolio requirements.
Note: Figures are as at 7 January 2022. Amount shown for Treasury Indexed Bonds is based upon the face value of the bonds outstanding unadjusted for changes in the CPI.
5Issuance of Australian Government Securities
Gross Issuance
A$b A$b
200 200
(F)
160 Treasury Bonds 160
120 Treasury Indexed Bonds 120
80 80
Treasury Notes
40 40
0 0
2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 2020-21
Source: AOFM. Forecast issuance of Treasury Notes is not available. Actual Treasury Note issuance will vary depending on the flows of Government expenditure and receipts.
6Treasury Bond curve
Over the last ten years the AOFM has gradually lengthened the Treasury Bond yield curve to 30 years and increased the average term to maturity
of the portfolio. That process is broadly complete, with the AOFM focused on maintaining the 30-year benchmark and continuing to support
ultra-long maturities through issuance into existing lines.
WAM of TBs Longest TB maturity on
(years) Issue (years)
8 Longest TB maturity on Issue (RHS) 35
30
7 Weighted average maturity of
TBs on Issue (LHS) 25
20
6
15
10
5
5
4 0
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21
Source: AOFM
7Treasury Bonds on issue
The AOFM will continue to use the most liquid (high-demand) parts of the yield curve to support the bulk of planned issuance, while
supporting other parts of the market by responding to demand and issuing in appropriate volumes. A new November 2033 Treasury Bond will
be issued by syndication in the final quarter of 2021-22 (subject to market conditions).
Source: AOFM. As at 7 January 2022.
8Treasury Bonds on issue
The RBA currently holds around 35 per cent of Treasury Bonds on issue. The AOFM will continue to monitor liquidity conditions in
individual lines and can respond by issuing into lines if appropriate.
Source: AOFM, RBA. As at 7 January 2022.
9Turnover – Treasury Bonds
Liquidity in the AGS market remains supportive – particularly around the 3- and 10-year futures baskets. Trading between AGS
intermediaries is strong which provides confidence to support investors when banks need to ‘short’ lines to provide liquidity.
Total turnover A$2.10 trillion (2020-21) Monthly average A$175 billion (2020-21)
A$1.54 trillion (2019-20) A$129 billion (2019-20)
Turnover by category (per cent) Turnover by tenor (per cent)
2018-19 2019-20 2020-21 2018-19 2019-20 2020-21
% % % %
30 30 35 35
25 Domestic International 25
30 30
25 25
20 20
20 20
15 15
15 15
10 10
10 10
5 5 5 5
0 0 0 0
0-2 years 2-5 years 5-9 years 9-12 years 12+ years
Source: AOFM. The AOFM relies on data provided by survey respondents and cannot guarantee the accuracy of this data
10Treasury Bond futures market activity
Monthly turnover (3m M.A.)
A$b A$b
600 600
500 500
3Yr Treasury Bond Futures
400 400
300 10Yr Treasury Bond Futures 300
200 200
100 100
Treasury Bonds turnover
0 0
Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21
Source: ASX, Refinitiv, AOFM
11Issuance of Treasury Notes
Regular issuance of Treasury Notes will continue. Weekly issuance volumes will depend on the timing and size of government
receipts and outlays and the AOFM’s assessment of its cash portfolio requirements.
A$b A$b A$b A$b
80 80 14 14
70 70 12 12
60 60
10 10
50 50
8 8
40 40
6 6
30 30
4 4
20 20
10 10 2 2
0 0 0 0
May-20
Dec-20
May-21
Dec-21
Feb-20
Sep-20
Oct-20
Feb-21
Sep-21
Oct-21
Mar-20
Jun-20
Mar-21
Jun-21
Nov-20
Nov-21
Jan-20
Jan-21
Jul-20
Aug-20
Jul-21
Aug-21
Apr-20
Apr-21
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Jan-22
Feb-22
Feb-22
Mar-22
Mar-22
Apr-22
T-Notes on issue Rolling 3-month T-Note issuance Outstanding 1-Jan-21 Matured Current outstanding
Source: AOFM
12Treasury Indexed Bonds on issue
Amount shown is the face value unadjusted for changes in the CPI adjusted capital value of the bond
The AOFM recognises the liquidity challenges facing the TIBs market, and will continue to issue to support this market. This means that prevailing market
conditions and appropriate tender volumes will remain important determinants of issuance decisions. Regular issuance supply will be maintained.
A$b Issuance since 30 June 2021 A$b
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
Feb 22 Sep 25 Nov 27 Sep 30 Nov 32 Aug 35 Aug 40 Feb 50
Source: AOFM. As at 7 January 2022.
13Turnover – Treasury Indexed Bonds
Total turnover A$58 billion (2020-21) Monthly average A$4.8 billion (2020-21)
A$49 billion (2019-20) A$4.0 billion (2019-20)
Turnover by category (per cent) Turnover by tenor (per cent)
2018-19 2019-20 2020-21
2018-19 2019-20 2020-21 %
% % %
50 50 50 50
40 40 40 40
Domestic International
30 30 30 30
20 20 20 20
10 10 10 10
0 0 0 0
0-5 years 5-10 years 10-20 years 20+ years
Source: AOFM. The AOFM relies on data provided by survey respondents and cannot guarantee the accuracy of this data
14Australian sovereign bond spreads
The AGS market continues to look attractive compared to other core sovereign markets on an outright and hedged basis from an offshore
investor perspective.
The AGS domestic investor base primarily comprises bank balance sheets and fund manager allocations, with the RBA also a significant
holder of AGS.
Sovereign bond yield curves Australia vs. US
US Australia UK Japan Germany bps bps
% % 2yr spread 10yr spread 30yr spread
3.0 3.0 100 100
2.5 2.5 75 75
50 50
2.0 2.0
25 25
1.5 1.5
0 0
1.0 1.0
-25 -25
0.5 0.5
-50 -50
0.0 0.0
-75 -75
-0.5 -0.5
-100 -100
-1.0 -1.0 -125 -125
5Y 10Y 15Y 20Y 25Y 30Y Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21
Source: Refinitiv, as at 11 January 2021.
15Australian sovereign bond spreads
Hedged via rolling 3m fx forwards
Source: Bloomberg, AOFM
16Net capital flow into Australian government bonds
by Japanese investors (AUD billion)
Source: Japan Ministry of Finance, Bloomberg. Data includes both AGS and semi government bonds.
17Shift in investor holdings of Australian government bonds
Since the RBA commenced its broad bond purchase program in late 2020, ADIs have reduced Treasury Bond holdings to the greatest extent, either
by participating directly in RBA tenders or indirectly via intermediaries. In contrast non-resident holdings have fallen only marginally in outright terms
(since late 2020), although this is more complex to understand given the influences of foreign exchange and cross-sovereign market yield variations.
Source: ABS, AOFM.
18Non-resident holdings of AGBs
Source: Australian Bureau of Statistics (ABS), RBA, AOFM. AGBs are Treasury Bonds and Treasury Indexed Bonds.
19Domestic bank and non-bank holdings of AGBs
Value of Holdings Proportion of AGB Market
Source: ABS. Holdings are not adjusted for repurchase transactions.
AGBs are Treasury Bonds and Treasury Indexed Bonds.
20Domestic bank holdings of AGBs and semi-government bonds
Value of Holdings Proportion of Respective Market
A$b A$b % %
250 250 60 60
50 Semi 50
200 200
40 40
150 Semi 150
30 30
100 100 AGBs
20 20
50 AGBs 50
10 10
0 0 0 0
Jun-11 Jun-13 Jun-15 Jun-17 Jun-19 Jun-21 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19 Jun-21
Source: ABS. AGBs are Treasury Bonds and Treasury Indexed Bonds.
21Australian government bonds
Treasury Bonds: Volume Outstanding (AUD) Yield (%) Modified Duration
5.75% 15 July 2022 24,762,673,000 0.13 0.50
2.25% 21 November 2022 26,500,000,000 0.34 0.85
5.50% 21 April 2023 34,199,708,000 0.44 1.23
2.75% 21 April 2024 34,400,000,000 0.71 2.20
0.25% 21 November 2024 37,600,000,000 0.99 2.83
3.25% 21 April 2025 35,600,000,000 1.19 3.10
0.25% 21 November 2025 33,800,000,000 1.34 3.81
4.25% 21 April 2026 37,100,000,000 1.38 3.91
0.50% 21 September 2026 31,800,000,000 1.47 4.60
4.75% 21 April 2027 33,899,566,000 1.51 4.70
2.75% 21 November 2027 29,700,000,000 1.57 5.40
2.25% 21 May 2028 29,700,000,000 1.64 5.90
2.75% 21 November 2028 32,100,000,000 1.70 6.24
3.25% 21 April 2029 32,999,803,000 1.73 6.48
2.75% 21 November 2029 32,900,000,000 1.78 7.06
2.50% 21 May 2030 36,600,000,000 1.81 7.52
1.00% 21 December 2030 38,700,000,000 1.86 8.47
1.50% 21 June 2031 36,300,000,000 1.87 8.73
1.00% 21 November 2031 39,000,000,000 1.88 9.29
1.25% 21 May 2032 30,200,000,000 1.90 9.61
1.75% 21 November 2032 19,800,000,000 1.92 9.81
4.50% 21 April 2033 18,800,000,000 1.91 9.10
2.75% 21 June 2035 8,550,000,000 2.07 11.29
3.75% 21 April 2037 12,000,000,000 2.18 11.91
3.25% 21 June 2039 9,900,000,000 2.33 13.55
2.75% 21 May 2041 13,000,000,000 2.43 15.01
3.00% 21 March 2047 13,300,000,000 2.56 17.80
1.75% 21 June 2051 15,600,000,000 2.56 22.08
Total: 778,811,750,000 Portfolio: 6.4
Treasury Indexed Bonds: Volume Outstanding (AUD) Yield (%) Modified Duration
1.25% 21 February 2022 5,120,853,000 -2.91 0.11
3.00% 20 September 2025 7,742,659,000 -1.12 3.53
0.75% 21 November 2027 6,500,000,000 -0.73 5.75
2.50% 20 September 2030 6,342,713,000 -0.41 7.95
0.25% 21 November 2032 3,400,000,000 -0.25 10.72
2.00% 21 August 2035 4,350,000,000 -0.10 12.16
1.25% 21 August 2040 3,800,000,000 0.20 16.80
1.00% 21 February 2050 3,950,000,000 0.39 24.81
Total: 41,206,225,000 Portfolio: 8.9
Source: AOFM, Refinitiv. As at 7 January 2022. Australian Government Securities are exempt from non-resident Interest Withholding Tax.
22Market Makers – Treasury Bonds
These institutions (listed alphabetically) have indicated that they make markets in Treasury Bonds.
The level of activity can vary between institutions.
23Further information
Website: www.aofm.gov.au Easy access to quoted yields:
www.rba.gov.au
Address: Australian Office of Financial Management
Treasury Building, Level 3, Newlands Street
Parkes ACT 2600 Australia Bloomberg:
“AOFM Go” (Homepage)
Enquiries: InvestorRelations@aofm.gov.au
“ACGB Govt Go” (TBs and TIBs)
“ACTB Govt Go” (TNs)
Thomson Reuters:
“AOFMINDEX” (Homepage)
“0#AUTSY=YBAU” (TBs)
“0#AUILB=YBAU” or “0#AUTSYIL=“ (TIBs)
“0#AUTNOTES=YBAU” (TNs)
24Disclaimer
The information in this publication is for general guidance only. It does not constitute legal or other professional advice, and should not be relied on as a statement of the law in any jurisdiction. As this publication is
intended only as a general guide, it may contain generalisations.
While the AOFM will make every reasonable effort to provide current and accurate information, neither the AOFM nor the Commonwealth of Australia accept any responsibility for the currency, accuracy or
completeness of that information. Any estimates, analytics, projections, forecasts or forward looking statements are subject to risks, uncertainties and assumptions which may cause the actual results and
performances to differ materially from any expected future results or performances implied by such statements. The AOFM recommends that you exercise your own skill and care with respect to the use or reliance
on that material or information, or seek professional advice if appropriate.
The AOFM and the Commonwealth of Australia disclaims all and any guarantees, undertakings, representations and warranties, express or implied, and shall not be liable for any loss or damage whatsoever
(including incidental or consequential loss or damage), arising out of or in connection with any use of or reliance on the information in this publication.
Copyright statement
Ownership of intellectual property rights in this publication
Unl ess otherwise noted, copyright (and any other intellectual property ri ghts, if any) in this publication is owned by the Australian Office of Financial Ma nagement (AOFM).
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Wi th the exception of the Commonwealth Coa t of Arms (see below); the AOFM l ogo; the l ogos listed under ‘Ma rket Ma kers’; and any i nformation sourced from third party copyri ght owners all material in this publication is
l i censed under a Creative Commons Attri bution BY 4.0 International Li cense. Third party data may not be reproduced without the consent of the third party.
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the l i cence terms is available from https://creativecommons.org/licenses/by/4.0/. The full l icence terms a re ava ilable from https://creativecommons.org/licenses/by/4.0/legalcode.
The AOFM's preference is that you attribute this publication (and any material sourced from i t) using the following wording:
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The Australian Office of Financial Management does not necessarily endorse the content of this publication.
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