Planned Issue of New Treasury Indexed Bond

4 September 2009

Operational Notice No. 15/2009 of 7 August 2009 announced that the Australian Office of Financial Management (AOFM) would resume issuance of Treasury Indexed Bonds (TIBs).

The AOFM plans to issue by syndication a new capital indexed bond with a maturity date of 20 September 2025 in late September or early October 2009. The initial issue size is expected to be at least $1 billion.

  • Holders of the 20 August 2010 TIB will be offered the opportunity to convert these bonds to the new 2025 capital indexed bond as part of the initial issue.

The AOFM has appointed Deutsche Bank AG Sydney Branch, RBS Group (Australia) Pty Limited and UBS AG Australia Branch as Joint-Lead Managers for the issue. Citigroup Global Markets Australia Pty Limited, JP Morgan Australia Limited and Westpac Banking Corporation Limited have been appointed Co-Managers.

The AOFM intends the new capital indexed bond to become a market benchmark and will undertake further issuance as necessary to achieve this. It is also planned, subject to investor demand, to extend the Commonwealth inflation indexed yield curve beyond 2025 at an appropriate time. Tenders may also be held for further issuance into existing TIB lines.

A new Information Memorandum for TIBs will be issued shortly. The new capital indexed bond will have the same structure and features as the TIBs currently on issue. Full details of the terms of the new capital indexed bond will be announced at the time the issue is launched.

The Australian Government has announced that it will legislate to make Commonwealth Government Securities eligible for exemption from non-resident interest withholding tax under section 128F of the Income Tax Assessment Act 1936. This exemption will apply to interest paid after the day the bill receives Royal Assent. The Government will seek passage of the legislation during the current Spring sittings of Parliament, which conclude on 26 November 2009.

  • The first coupon payment in connection with the new 2025 capital indexed bond is planned to occur on 21 December 2009 and will not be subject to non-resident interest withholding tax provided the planned legislation receives Royal Assent before then.

The AOFM securities lending facility will be expanded to enable borrowing of TIBs. Eligible market participants will be able to borrow TIBs through the facility on the same terms as Treasury Bonds are currently able to be borrowed through the facility. Existing TIB lines and the new 2025 TIB will be able to be borrowed through the facility. The capacity to borrow existing lines of TIBs is expected to be operational within the next fortnight. Expansion of the securities lending facility to enable borrowing of TIBs is expected to enhance the liquidity of the TIBs market and the capacity of intermediaries to make two-way prices for TIBs.

Last updated: 31 July 2015