Stocks, Bonds & Forex Trading
Source: business.theage.com.au

Vanessa O'Shaughnessy
February 7, 2009

THE first batch of bonds that will fund Australia's inescapable budget deficit have been sold at a yield of almost 4 per cent.

Yesterday, the Australian Office of Financial Management said bonds worth $601 million had been allotted, with an average yield of just over 3.9 per cent. They had a coupon rate of 6.25 per cent, and will mature on April 15, 2015.

The AOFM manages about $50 billion in government debt, having continued to issue bonds even though the federal budget has been in surplus for several years.

Over the next five months it will issue additional bonds worth between $22 billion and $24 billion. Some commentators expect the supply of Government bonds to rise to $120 billion over the next two years.

The funds will be used to pay for the Federal Government's $42 billion economic stimulus package, which includes hand-outs for parents and some taxpayers and infrastructure initiatives.

The budget is expected to remain in deficit for four years.

The AOFM has also announced its plans for further bonds sales. On Wednesday it will offer $600 million in Treasury bonds that will mature in May 2013. It will allocate on Friday another batch of bonds , to mature in June 2014.