Enormous demand for Aussie bond

Australian bonds are back in strong demand and higher yields are being offered.

An Australian Government Bond issue has attracted an eye-watering $76bn in demand in what is a sign that the market continues to be strong for attractive offers.

The final size of the bond is not yet known, but is estimated to be about $15bn.

The time frame of the bond is out to 21 March, 2036.

Joint lead managers working on the transaction, which includes CBA, have already secured $3.2bn of interest.

The offer is priced at 2.5 basis points to 3.5 basis points above the bank bill swap rate and the indicative yield is 4.48 per cent to 4.485 per cent.

It comes after the NSW electricity distribution network company Ausgrid headed to the bond market last week, searching for at least $300m with a seven-year fixed rate and a yield of about 5.5 per cent.

Working on the raise were ANZ, CBA and Westpac.

Ausgrid regularly taps the bond market to diversify its funding structure. The business is owned by the NSW government, AustralianSuper and IFM.

It also follows HSBC’s first-ever subordinated bond in Australia, which was a record order book for a subordinated bond at $5.8bn. HSBC issued $1.5bn with a 6.2 per cent yield.

Part of the bond was issued with a floating interest rate.

Australian bonds are back in strong demand and higher yields are being offered, which have not been seen for some time.