Government to increase securities
The Australian Government is increasing the issuance of Commonwealth Government Securities (CGS) by up to $5 billion because of demand for Australian Government Treasury Bonds.
The Treasurer Wayne Swan said in an announcement yesterday that the Government would increase the securities to a total of $60 billion in its attempt to maintain stability in Australia’s financial markets.
“There has been strong demand for Australian Government Treasury Bonds in the wake of the global financial crisis,” Swan said.
“The additional issuance provided so far has assisted conditions in the Treasury Bond market, allowing it and the Treasury Bond futures market to continue to operate in an efficient and effective manner.”
Swan said Australian Government Treasury Bonds are risk-free and are considered a benchmark for participants in the Australian financial markets “to set interest rates beyond the short end of the yield curve, including in the bond futures market”.
Swan gave a direction to the Australian Office of Financial Management (AOFM) to increase the issuance of the securities, the proceeds of which will continue to be invested by AOFM in “financial assets which best offset the cost and risk of the additional issuance”, including bonds issued by state and territory governments. Swan said the increase in borrowings should therefore not result in any “net cost” to Government.
Swan said the Government “retains the flexibility” to determine whether further CGS issuance increases are warranted in order to maintain liquidity in the Treasury Bond market.
The increase follows a May 2008 announcement that the Government would add approximately $5 billion to the CGS stock on issue. Swan said over $4 billion of this additional insurance has since been undertaken.
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