Bond Conversion Tenders

27 September 2001

Consistent with the objective of maintaining a liquid and efficient market
for Commonwealth Government Securities, it is proposed to offer holders
of nominated Treasury Bonds the opportunity to convert their holdings
into holdings of other nominated Treasury Bonds. These offers will be
conducted on a competitive tender basis.

Bond conversion tenders will enable the Australian Office of Financial
Management (AOFM) to more actively manage the maturity profile of outstanding
bonds. For example, it will be possible to:

  • increase the amount of particular bonds outstanding more quickly
    than can be achieved in the current low gross issuance environment;
  • smooth the profile of outstanding bonds in a manner that improves
    the overall efficiency of the market.

The AOFM intends to conduct the first conversion tender of Treasury Bonds
prior to end of the current calendar year. At this stage there are no
plans to conduct conversion tenders for Treasury Indexed Bonds. The frequency
of conversion tenders will depend on market interest.

The initial focus of conversions is expected to be directed at enhancing
the liquidity of key long-dated benchmark Treasury Bonds. This is expected
to involve converting bonds with a term to maturity of between 4 and 8
years into bonds with a term to maturity of greater than 8 years.

Bonds acquired by the Commonwealth as a result of conversions are not
expected to be reissued in the future.

Conversions will occur on a face value basis (i.e. an equal face value
amount of the offered stock will be converted to an equal face value amount
of the destination stock). Both the purchase and sale legs of the conversion
tender will be settled on a gross basis.

A maximum face value of bonds to be converted will be announced prior
to each tender. The Commonwealth reserves the right to convert any amount
up to the announced maximum face value of bonds.

Bidding format

The Reserve Bank of Australia will announce a yield for the offered stock
at 11:45am on the day of the tender. Given the announced yield for the
offered stock, bidders will indicate the yield for the destination stock
at which they would be prepared to convert an equal face value of the
offered bond to the destination bond. Bids will be able to be submitted
between 11:45am and 12:15pm with results announced at 12:45pm.

Acceptance of bids will be made in ascending order of yield bid, i.e.
from the lowest yield bid to the highest yield accepted.

Announcement of tenders

Details of conversion tenders will be announced one week prior to the
date on which a conversion tender will be held. Announcements will include
details of the:

  • offered bond;
  • destination bond;
  • maximum face value amount to be converted;
  • method to be used for allotting stock;
  • date and amount of the first interest payment for the destination
  • closing time for bids; and
  • settlement arrangements.

Terms and conditions

Further issues of Treasury Bonds and Treasury Indexed Bonds will be made
under cover of new documentation which details the terms and conditions
of issuance for these securities, including the proposed issuance of conversion
stock. Copies of these documents can be found on the AOFM website listed

Half basis point bidding

Bidding at all tenders for Treasury Bonds and Treasury Indexed Bonds
may now be expressed to a maximum of three decimal places (eg 10%, 10.0%,
10.00%, 10.000%). Bids must be whole multiples of 0.005% (eg 10.000%,
10.005%, 11.000%). Bids that are not whole multiples of 0.005 will be

Further details regarding Commonwealth bond issuance can be found at


Michael Allen

Chief Executive Officer

(02) 6263 1100

Last updated: 5 March 2014