Treasury Bond Buyback Tenders

27 July 2016

As foreshadowed in the 4 May 2016 Operational Notice ‘Issuance of Australian Government Securities’, the Australian Office of Financial Management (AOFM) is planning to provide holders of short-dated Treasury Bonds the opportunity to convert their holdings into holdings of other nominated Treasury Bonds. This will assist the AOFM in its cash management task around the time of bond maturities and contribute to an orderly and efficient Treasury Bond market.

This will be achieved through Registered Bidders in the AOFM Tender System. Regular buyback tenders will be conducted for Treasury Bonds shorter than those comprising the three year Treasury Bond futures contract basket; separate tenders for issuance of longer-dated Treasury Bonds will be held.

Conduct of Buyback Tenders

The AOFM Tender System Conditions of Operation and the Information Memorandum for Treasury Bonds have been updated to facilitate buyback tenders.  The Conditions of Operation will also be sent to Registered Bidders shortly.  There have also been amendments to the Information Memoranda for Treasury Notes and Treasury Indexed Bonds.

A comprehensive description of how Treasury Bond buyback tenders will be conducted is in the Information Memorandum.  Broadly,

• offers for one or more Treasury Bond lines will be invited.

• a maximum volume will be set.

• offers may be lodged via the Yieldbroker DEBTS System.

• acceptance of offers will be made in descending order of yield offered, that is, from the highest yield offered to the lowest yield accepted.

• if there are insufficient offers at yields the AOFM judges to be acceptable, an amount less than the maximum volume may be repurchased.

• repurchases will be made at the yields offered (i.e. a ‘multiple price’ rather than a ‘single price’ format).

• settlement will take place on the second business day after the tender (unless otherwise specified).

• Treasury Bonds acquired will be cancelled.

Buyback tenders in 2016-17

One buyback tender will be held during most months in 2016-17.  Offers will be able to be lodged between 9:45 am and 10:00 am (Australian Eastern Standard Time or Australian Eastern Daylight Time) on buyback tender days.  On these days, a tender for the issuance of the same maximum face value volume (regardless of whether the volume repurchased was the maximum volume) of Treasury Bonds will be held, with bids to be lodged between 10:45 am and 11:00 am.  These tenders will be in addition to the issuance announced after the release of the Budget.

The first buyback tender is planned to be held on Monday, 19 September 2016.  Details of the tender, including the Treasury Bond line and maximum volume to be repurchased, will be announced closer to that time.  A tender for the issuance of the same volume of another Treasury Bond will be held between 10:45 am and 11:00 am on the same day.

 

Last updated: 28 July 2016