“I’d like to borrow $7 billion, please.” Try saying that to your bank manager. Yet, without any great fanfare, the AOFM, the Commonwealth Government’s finance arm, has done the equivalent by issuing $7 billion worth of May 2028 bonds via a syndication deal this week. It’s the largest bond offering by the AOFM since it offloaded $7 billion worth of April 2037s in October 2014 and prior to that sale, $7 billion worth of April 2026s in March 2014.
It gets better, too. The coupon rate of interest on the bonds is a miserly 2.25%, although the final yield to maturity is slightly higher at 2.525%. 70% of the bonds were taken up by domestic buyers. Fund Managers, both domestic and foreign, took about 30%, while banks’ trading desks took another 30%. YieldReport has commented on several occasions on what appears to be a trend towards greater issuance of FRNs in the corporate sector and speculated on the reasons for it. In any case, pressure on issuers to offer FRNs does not appear to have reached the ACGB sector.