Demand supports growing issuance from Australian sovereign sector issuers

FAJARDO We have experienced broadly positive market conditions throughout the financial year and particularly in calendar 2024. We were able to complete our 2023/24 borrowing programme by April and raise an additional A$3.3 billion (US$2.2 billion) of pre-funding before the budget on 11 June, to reduce the 2024/25 forecast borrowing programme to A$24.9 billion.

Away from our regular tenders, which have had strong bid-to-cover ratios in excess of four times, four of our five syndicated transactions for 2023/24 occurred in calendar 2024 – which is a sign of the strong risk-on environment. Our last benchmark syndication, which was a tap and not a new bond line, had our biggest ever book, at more than A$7 billion, and the largest participation by offshore investors during the financial year, with 36 per cent allocation.

MUNRO From SAFA [South Australian Government Financing Authority]’s point of view, issuance conditions and, specifically, demand have been favourable. Last month we issued a new May 2031 line and achieved the largest and most diverse book we have ever seen, with good offshore participation. Overall, market conditions are positive – but at a price. Investors are stepping in where they see value in the curve.

ZUVICH I agree. The 2032 bond we issued a couple of months ago achieved a very good book size. We had a slightly compressed timeframe to complete it but we were able to print the volume we needed with very tight pricing. This was very reassuring, given there was a bit of uncertainty ahead of budget season.

During the year, in general there hasn’t really been any time at which we have found it difficult to get what we needed done. Considering economic conditions and where yields are at the back end of the curve, the long end seems to be where a lot of the investor interest is at the moment – domestically and offshore.

CHANDLER The changing composition of demand is also one of our main takeaways. We are seeing a broadening and deepening of investors active in this market, and it feels like there has been good headway made by the semi-government sector – evidenced by the 6-7 new investors into each of the first three syndications we have done this calendar year.

Even so, our sense is that there is still a lot of untapped potential. The RBA [Reserve Bank of Australia] potentially following other central banks in cutting rates is not a new view. The differentiation here is more the timing of when this starts to happen. Our liaison with our panel banks and
beyond indicates that there are still a lot of foreign investors in particular who are waiting for their time to step into the market.

KELLY Conditions have been fairly favourable for much of this year, but the key point for me is that this is an ever-changing playing field – what worked last year might not work this year, and so forth. I’m constructive overall, but I think the market is trying to work out the price we need to pay for A$100 billion of supply from the sector this year.

The more broadly we can distribute the A$100 billion dollars, the more comfortable everyone will be. Dan’s point is important in this context: the emergence of previously untapped Australian dollar potential offshore has been quite a significant development this year.

WHEADON It is very much business as usual from the AOFM [Australian Office of Financial Management]’s perspective. We have a bigger task to execute this year but start from a position of strength following successive budget surpluses. Our cash position is strong and gross issuance is only a bit more than maturities so we aren’t asking the market to do a lot of heavy lifting. Market conditions are of course ever-changing but have been supportive overall.

BLUNT Spreads have been a bit wider in the past two or three months, but demand has outstripped supply through the budget period. Going into the new financial year, I think all the issuers could be further ahead if they wanted to be so at these levels. The sector is in a really good spot, with issuers finishing 2023/24 very strong and, if anything, pushing away demand.

KELLY Higher outrights and wider spreads have certainly increased demand from many sectors. Demand is outstripping supply at the moment and this is an important signal. The amount of reverse enquiry we are turning away, particularly over the last couple of months, has been almost unprecedented.

McCOLOUGH Issuance and outstandings have increased over the past four years but so too has turnover. The increase in issuance over recent years has attracted demand from a broader investor base. This is the theme that has played out over recent months.

GEDDES The market has been resilient. There have been patches of macro volatility and the market is probably searching for things to be worried about at the moment. But for the most part it has taken events in its stride.

The states and the AOFM have got solid trades away, while 10- and 12-year taps have all come within a couple of basis points of mid, with really strong orderbooks, in a part of the curve that has become quite deep and liquid. While there have been supply concerns for the sector, the resilience of the market as it grows has been pleasing.

McCOLOUGH Global investors have a reason to pause when our central bank is being discussed in the context of rate hikes while other central banks are either cutting or are projected to.

But let’s forget about whether the RBA will hike rates in August or sometime this year. In the global context, we are in a transition from rate hikes to rate cuts, and Australia – as a very high-yielding triple-A rated sovereign – fits very well on the global reward-for-risk spectrum. In a normal context, this is the sort of environment in which Australia will outperform at sovereign level. Meanwhile, the spreads semis are offering will really put them on the radar.

Another supportive factor is hedge costs. From the perspective of a US dollar investor, we should not be comparing the nominal 10-year bond spread but the outcome net of hedging. This is a very positive environment over the medium term, despite the near-term underperformance.

BLUNT Australia has a steep yield curve and investors are attracted to our market, especially because issuers are funding at 10 years or longer for a large amount of their programmes. Investors are conscious of the RBA’s influence at this point of the rate cycle but there is still no shortage of demand, from a broad investor base.

KELLY The message we heard recently in Tokyo is that unhedged investors are really focused on the next RBA move. The expectation at the time that the next move was a cut had been driving their more recent foray into semis: there is a lot more potential for capital appreciation buying 10-year Australian
dollar bonds at 5.25-5.5 per cent than there is buying 10-year JGBs [Japanese government bonds] at 1 per cent.

FAJARDO Investors are talking more about the positive carry and steepness of the curve, as opposed to their expectations about RBA announcements. When we were in Europe last year, many investors said what the market was pricing in didn’t make sense to them. This view has been vindicated. It is more about the global relative value of semis and why they are a good prospect.

KELLY We have also had quite significant outright swings over the past 12 months. If rates rally by 30 basis points over a couple of days, there is a fair chance one or two of us will want to hit this rally point. I expect there will be more of this going forward with the larger issuance tasks. Issuers will need to work out how we are going to navigate it but I don’t think it will be problematic.

WHEADON Ultimately, we are all looking at the same calendars and receiving similar advice about the cleanest windows in which to execute. This will contribute to clustering.

CHANDLER There is a seasonality to issuance, too. For example, there is typically a lot of flow in January following the Christmas and new-year holiday period. Other examples of issuance spells include the period prior to large bond maturities, following state budgets and either side of European holidays.

The other aspect to note is that when one issuer steps out with a transaction, and there are indicators that the transaction has gone well, often there is follow-on supply from other semi-government issuers.

FAJARDO This is a good point, Dan. QTC [Queensland Treasury Corporation] was one of the last to issue via syndication in January, as we had our annual Australian dollar bond facility update early that month. Having witnessed strong volume and price outcomes from other transactions – including oversubscribed deals that the market absorbed really well, and good secondary market performance – we had the confidence to follow and take advantage of the positive market conditions.

Our deal was a A$2.75 billion new 2034 green bond and, at the time, it was our largest final orderbook at more than A$6 billion. We were also able to price at the tight end of the range. This shows that it is still a stable and positive market backdrop in which to issue, even when there has been previous supply.

ZUVICH It does. When we updated our programme last year, we announced we would be issuing a bond via syndication in the last quarter of the financial year. This gave us a window from April onward to consider when to come to market.

When the time came, some of the issues with picking windows included the fact it was budget season, as well as trying to find a two-day window in which economic data domestically or offshore was not going to affect investor sentiment or yields. This created clustering, though it really did not affect what we needed to do. We were always aiming for last quarter of the financial year and we priced a 2032 bond in May at a level we were very happy with.

We have indicated a similar timetable for what we need to do for 2024/25. We will stick with this timetable for now, but there are some levers we can pull to either bring it forward or delay if the situation warrants it.

MUNRO We don’t have the capacity to simply issue when we want. With a smaller programme, it is client-led demand that drives our issuance – we have to consider the other side of the balance sheet.

Looking forward to the budget for 2024/25, which has a slightly larger programme, we are aiming to get more consistency into our issuance. We are considering four or five syndications per year, to get some rhythm into our programme and give clarity to investors. We will complement this with tenders.

We are obviously much smaller than the eastern states, so we must consider what will suit our client base. Syndication gives our investors the most transparency and comprises most of our issuance going forward.

WHEADON We have announced the syndication of a new December 2035 Treasury bond for the September quarter. The bulk of our funding will continue to come from tenders.

KELLY Syndication is one of three funding tools we use. About 25 per cent of TCV [Treasury Corporation of Victoria]’s issuance has been through syndication almost every year since the pandemic. I don’t think this will change too much.

But we are thinking a little differently about what a syndicated transaction may look like in 2024 and beyond. In the years following the pandemic, it was really important for TCV to be able to show investors the strength of demand for our bonds – which we did through building large books and pricing them accordingly.

We have moved on from this somewhat. Our syndications may now give more consideration to what is the right price for the transaction we want to print. We will be thinking about how we build a book that has broad investor engagement and that will allow us to give appropriate allocations.

Do we do more frequent but smaller syndications? Do we try to use syndication to help extend our curve? Is syndication the right tool to issue into deep demand, or do tenders and reverse enquiry provide better options? These are the things TCV is thinking about when it comes to primary issuance.

CHANDLER We don’t put out formal guidance on trades we are planning to do. In the past it has seemed to create endless speculation in the market about when a trade was going to come. This can have a negative impact on our spreads, and thus on our clients and our existing bondholders. Consequently, we prefer to reiterate that approximately 80 per cent of our funding comes via our benchmark bond programme, which currently runs from 2024 to 2037. 

We have a detailed funding plan and the ability to action and execute deals very quickly. When we spot a favourable transaction window, it will ultimately come down to a decision on which one of the three issuance levers available to us will achieve the best outcome for New South Wales (NSW) and our clients.

FAJARDO QTC has a track record of having most of our borrowing programme funded by public issuance, with syndication as our most favoured method because of the added transparency it offers investors. Over the last few years, we have used syndication predominantly for new bond lines as it enables us to engage with the broadest, most diversified investor base while building liquidity from day one.

Last year, we increased the number of transactions from three to five, adding two syndicated taps. With a larger programme ahead, we envisage that syndications will be used not just for new bond lines but also for taps – as we did on 4 July with a A$1.5 billion tap to our July 2036 bond. We think this is the most efficient means of issuance to raise benchmark-sized funding.

We have stated that we will issue a new 2037 benchmark bond, or longer, as well as a new green bond with a tenor of 10 years or more. Meanwhile, we will continue to consider floating-rate note issuance. Obviously, we will sequence these transactions to optimise investor demand, so the timing is to be determined.

CHANDLER The short answer is that the same level of liquidity does not exist in TCorp [NSW Treasury Corporation]’s ESG [environmental, social and governance] programme as in our nominal lines. Our strategy is to run a relatively small number of ESG lines where we periodically add liquidity then add a new line as bonds approach maturity.

We are more selective about which lines we issue in this space. We also need to be quite careful as to whether we issue bilaterally via reverse enquiry or via a public tender, given the reduced capacity available to issue.

KELLY TCV is at the opposite end of the spectrum to TCorp in how we set up our sustainability programme. Our 2035 sustainability bond is a benchmark line. This means liquidity in our sustainability line is no different from any other TCV bond and secondary support for the line through syndication, tenders or reverse enquiry is also the same as any other bond.

We first launched the bond in a A$2.5 billion trade two years ago. There is now almost A$8 billion outstanding in this line. The asset book was A$9 billion when we launched and is A$16 billion at the moment. The only challenge we face when considering future issuance into this line or a new one is the speed at which the assets in the pool are spent, which is currently about A$3 billion a year.

KELLY It removes the window conversation altogether. Reverse enquiry is simply responding to demand from investors in any bond at any time. With a 15-year curve, this allows us to be active in all our lines and provide liquidity to our investors and our dealers.

Meanwhile, tenders are a really good tool to give the street the bond it wants, and perhaps even squeeze out some bonds that the street doesn’t want but work for us as part of a dual- or triple-tranche tender.

CHANDLER I agree. At the time of our most recent syndication, following the budget, there was an option to do a lot of reverse enquiry. We elected to issue via syndication to make a public offering. Considering there had been some volatility in the semi-government sector over a few weeks prior to the trade, we used the option that best suited our objectives. Next time, it might be reverse enquiry or tender. 

CHANDLER There was quite a lot of weakness in semigovernment spreads in the lead up to the NSW budget announcement. When the budget was published, there was a very quick turnaround in the market’s thoughts about valuations – and spreads tightened as a result.

Given the resulting price action, we believed it was better for ourselves, our clients and the wider market to issue a public deal. This way, we could set a clear level for TCorp and ultimately the wider market, and hopefully give participants confidence that there was very strong demand at this price point.

WHEADON The AOFM is pre-funded for the 2024/25 financial year. Our cash holdings are a substantial source of funds for the 2024/25 financing task. More broadly, we have plenty of flexibility in our funding programme to face into the type of volatility being discussed here. I don’t think it is going to be a problem for us.

Frontloading issuance is a perfectly normal technique for reducing risk. We are always looking closely at how far ahead or behind we are relative to the pro rata rate. Views on future risk events will influence where we position ourselves, but so does how the budget position is tracking relative to forecast.

FAJARDO We have had a disciplined approach to issuance and want to fund ahead of run rate to account for any market disruptions. So far in 2024/25, we have already issued A$4.2 billion of face value – about A$3.9 billion in cash – which makes us around a month ahead of run rate.

QTC carries a large amount of liquidity, which is recognised by our rating agencies. We can use this liquidity in periods of market uncertainty as opposed to having to fund in a volatile environment.

MUNRO We are also in a pre-funded position. Our indicative funding programme market release in June noted that we had A$7.5 billion to do in 2024/25 and we have issued A$1.5 billion already.

Tying into what Jose was saying, we have to be cognisant about making sure we have adequate liquidity. Consequently, we have to ensure we keep pushing our liquidity higher – and we saw an opportunity to do so after our new budget was released.

CHANDLER We took A$2 billion across into 2024/25, so we have completed A$2.3 billion of our A$22.3 billion funding task. As the NSW budget had been released by the time we did our syndicated trade [on 21 June], we knew what 2024/25 was going to look like, volume-wise – which was materially lower than previously forecast. Pre-funding was a case of having spotted a good window after spreads had been performing and the market had recovered somewhat.

We could have just as easily done the deal two weeks later, in this financial year. The timing demonstrates the flexibility we have to issue when circumstances suit. In this instance, it made sense to print in 2023/24.

McCOLOUGH This year doesn’t seem to look any different from most others when it comes to the issuance profile and getting ahead of the pro-rata run rate. The first four months of every financial year tend to deliver a greater percentage of supply relative to the standard run rate, so it seems pretty
natural and normal.

Considering the context of a market disruption that might come in H2 from the US election, the French election has somewhat provided a test. While this affected liquidity a bit, it was a case of the market reacting in the moment but returning to the normal fundamentals of investing and issuing thereafter.

Going back to 2016, when Trump first came in, it was meant to have been bad for equities. However, within what seemed like a few hours equities were rallying significantly. Bonds were all over the place for a little while, but the market typically settles down quite quickly.

GEDDES This is a good point. At the start of this year a lot of our clients – corporates and financials – were planning to pre-fund or get ahead of risk events in H2. But perhaps this activity in itself created positive market conditions – and we have witnessed quite good performance through the year. It will be interesting to see what conditions are like in H2.

KELLY There is still headroom in Australian dollars domestically and offshore, and we have witnessed this over the past couple of months. It is no accident that we are experiencing greater involvement from domestic real-money accounts when yields are at 5.5 per cent and spread to bonds is 85 basis points. It is a different conversation from what it was three years ago, but that is OK.

Recent public semi-government trades have seen a significant increase in offshore allocation. For instance, 46 per cent of our 2038 trade went offshore, which is unprecedented for TCV. Offshore real-money accounts, like domestics, are engaged because of yield and spread.

This is not the only type of offshore demand we are experiencing. We are observing a lot of reserve managers getting involved, which comes down to the conversation we had at this forum last year – that the semi-government market, with around A$600 billion on issue and turnover somewhere around A$800-900 billion, is an asset class of its own that is a real alternative to ACGBs [Australian Commonwealth government bonds] for these types of investors. This is starting to gain real traction, particularly with offshore official institutions. Further diversifying our Australian dollar investor base is still our number one priority.

MUNRO Another aspect of demand I want to highlight is the increasing hedge fund bid. This has changed the composition of our books, but the impact varies based on the scale and the type of hedge fund participating. There is a lot more diversification we can tap into, and understanding the investor and its needs is an important part of this.

CHANDLER Whether an investor is categorised as a hedge fund or an asset manager is a grey area. There are ‘pods’ within hedge funds that exhibit asset manager-type qualities, for instance a tendency toward longer holding periods. Conversely, some asset managers domestically and offshore increasingly exhibit fast-money attributes. They might try to capture a new-issue premium on a deal, for example. To be clear – this is fine.

Hedge fund allocations have been increasing as a percentage of semi-government books. Over the years, a large hedge fund component might have indicated that a transaction wasn’t strong – but we need to check this thinking. Just because an investor is categorised as an asset manager for the statistics in a syndication book doesn’t necessarily mean it is a stereotypical buy-and-hold asset manager. It might be there for the new-issue concession only.

If things keep following the current trajectory, hedge fund percentage allocations might increase a little more. If we are all doing our jobs well, there will be a lot of rigour around understanding different hedge funds’ characteristics. As Don was saying, it is important to understand their objectives and to recognise which ones are exhibiting the behaviours we might like to see and which are not – and scaling books accordingly.

ZUVICH In our last issue we also noticed greater participation from a larger number of hedge funds. It falls to us to be able to discern which accounts to allocate to.

CHANDLER There are a lot more names now – and this has probably spilled over from AOFM books.

WHEADON There can also be a lot of pods within a single hedge fund. Nowadays, we might see five or six pods operating under a single name, all running slightly different strategies.

WHEADON Things changed during the COVID-19 era. With the growth in funding and our transactions sizes came an explosion in hedge fund participation. They became a much bigger proportion of orderbooks.

Through our investor relations programme, we have put a lot of time into getting to know the different funds and, where possible, to understand the different investment philosophies they bring. This allows us to apply tiering to our hedge fund allocations. Overall, their participation is welcome, and they have added depth and liquidity to the ACGB market.

KELLY Perhaps we – meaning TCV – are guilty of still thinking of hedge funds in the pre-COVID-19 way. In the post TFF [term funding facility] world, we are constantly being asked where the next marginal buyer is coming from. I don’t think there is one answer to this question: a marginal buyer can be offshore real money, a central bank, smaller domestic banks that are moving into the HQLA [high-quality liquid assets] model or a hedge fund. They are all going to play an important role and it is important for us not to price or allocate any of them out of our space.

But, as Dan said, we need to know individual hedge fund portfolio managers and individual pods to align ourselves with funds whose businesses are aligned with ours. A lot of global hedge funds have reached out to organise meetings directly with TCV to explain their business models. I believe this is an important change in the market in the past 6-12 months.

MUNRO Hedge funds are one of the many sectors looking at semis and they will be a long-term buyer. We have to tier them,just like we would do with real money or any other sector.

Overall, though, this shows us that Australian dollar capacity still has a lot of legs. Every trip issuers go on seems to uncover new investors. The onus is on us to understand all the new investors into the sector – not only the fast money accounts – and communicate our view to investors on our allocation
process based on their behaviours.

WHEADON What I have observed is that a lot of hedge funds are also now managing money on behalf of real-money clients. This is why it is so important to understand who we are dealing with.

FAJARDO There have been positive developments on increasing asset allocation into fixed income, which we are seeing domestically and offshore. Meanwhile, a broader set of investors, including hedge funds, is getting involved in the semi-government sector for the first time, or getting back into it, because they are able to execute transactions in a size they need. They have a lot more confidence in their ability to get in and out of these trades if needed. This is important for us.

McCOLOUGH I have been in a lot more meetings this year that are education-based on the sector. It had been evolving for a while but it is accelerating.

WHEADON The green bond is a key component of the government’s sustainable finance strategy, which sets out measures to support the growth, transparency and credibility of the green finance market in Australia. The states have been busy in this space for years but the missing piece was always a sovereign issue. I think it can only be beneficial to the wider market.

As to investor participation, there were 17 new names to syndications in the orderbook and possibly a couple of new names to ACGBs more generally. This was very positive.

We did a very extensive roadshow prior to the trade, and about half the accounts we met participated in the deal. We have since received feedback from investors that did not. What we found is that the green-bond framework and investment in Australian green bonds was approved but it was the portfolio managers who made the choice not to participate.

Generally, the issue was pricing. The bond priced pretty tightly – something like 2 basis points inside our generic curve. It has cheapened a little since, and we have every confidence many of the accounts that didn’t buy in primary will pick it up in the secondary market.

WHEADON We have said on several occasions that achieving a greenium was not a specific goal of this transaction. It is of course nice that we got one, given the enormous amount of work that goes into bringing a green bond to market from scratch. On the day, it was the quality of the orderbook that enabled us to print through the curve. We would have been silly not to take it.

WHEADON A new green bond every couple of years is probably the sort of cadence the market can expect from the AOFM. We will be tendering into our existing June 2034 line but there won’t be anything new until 2026 at earliest.

To Tom’s earlier point, trading in our new green bond is not the same for our vanilla lines. Turnover is a little lower and bid-offer is slightly wider, for example. This is not very surprising given the tightly held nature of the bond and smaller overall size. Encouragingly, after a slow start we have seen a good pickup in activity in recent weeks.

MUNRO It’s beneficial to the semi sector as a whole that the AOFM has come to market with this green bond. The AOFM has opened doors at central banks and with many offshore investors, and the semis have been able to come in on the back of this.

From SAFA’s point of view, as a smaller issuer, labelled bonds didn’t work for us. Our sustainable bond framework, published last year, has shifted the dial in the sense that, going forward, everything we issue will be sustainable under our framework.

FAJARDO It is beneficial for semis when a marginal investor is buying government bonds and then gravitates toward semis.

If there has been additionality of names in the AOFM book, hopefully these names will gravitate toward semi-government labelled issuance.

GEDDES Investors have evolved and are looking for additionality when assessing what is being funded by these programmes. It was pretty pleasing to hear, on the AOFM’s roadshow, a lot of the questions about what Australia is doing, and about the alignment between the states and the Commonwealth.

KELLY This is why it is important. It takes the conversation away from one solely focused on labelled issuance to one about what governments are doing at policy level, including their climate action strategies. This is the really important conversation.

WHEADON Investors are very focused on this. They need to be confident the projects that find their way into the asset pool are deliverable and are going to have an impact. Credibility can be lost quickly. Tight eligibility windows for use of proceeds help here.

CHANDLER In NSW, just because a project aligns with standards set out in our framework documentation does not mean the asset ultimately finds its way into our asset pool. Sometimes this can be the result of an inability to accurately report impact, as an example.

While our framework allows us to incorporate future expenditures, NSW has chosen to de-risk the programme by including only money that has been expended – and we have a tight look-back period of two years. We also remove assets from our asset pool once the bond they are mapped to matures. We do this primarily to enhance the credibility of our programme.

ZUVICH We have a very tight look-back period, of 12 months. The asset pool is growing by new initiatives the government is announcing and the scope for the asset pool to increase is only going to grow.

We are confident we can add to the green bond but it may not be at the pace investors want. Since we launched, at A$1.9 billion, we have tapped it for an additional A$130 million in the past 12 months. It will grow as part of its natural lifecycle, but perhaps not at a pace that will satisfy all investors.

KELLY There will always be a level of conservatism on this. There is a lot of reputational risk involved, for investors and government issuers. TCV operates with a look-forward approach and this ensures there is a very rigorous process around the asset pool and our sustainability reporting.

MUNRO The past 12 months has been positive for the sector including a lot of secondary liquidity. It is continuing to grow, with new offshore investors and more client sets. Liquidity in the secondary market is well supported by panel banks and this provides confidence for investors.

It is crucial to ensure liquidity stays strong to make sure we are showing good bid-side and offer-side liquidity for investors at all times. This is probably the main challenge for the market over the next 12 months.

CHANDLER We have had the same feedback. Whether it is 10am in London or 11am in New York, investors tell us they can execute quite close to mid on either side these days. I don’t know whether this is the case across the board for the states and territories but it certainly is in the larger names. We have had this feedback directly and it is a huge change in the structure of the semi market.

MUNRO Demand for semis and liquidity in all the benchmark lines out to 15 years has been solid. Semis have enjoyed strong demand from investors in the 10-15 year part of the curve, a differentiator to the global supranational, sovereign and agency sector and a sweet spot for semis recently. The challenge for the semi sector is to extend this out to 20 years or more.

KELLY The balance sheets of the biggest states are so significant that I believe we have to aim to establish longer liquid tenors to manage our refinancing risk. I want to build TCV’s curve out to 20 years – and I think it is achievable. It won’t be easy, though. It will take a lot of engagement with, and support from, investors to get it established.

CHANDLER We have experienced quite a bit of interest around 20 years. The main reason we haven’t printed in this area is more from an outright yield perspective. For 2024/25, we are working on a smaller programme so we will most likely use our bullets in the parts of the curve we need to support.

As we move through the cycle, circumstances change – and maybe our thinking changes too. The AOFM blazed a trail for long-dated issuance a number of years ago and obviously having the AOFM already there helps. Meanwhile, the semis did a bit in 20 and 30 years in 2020, which was primarily driven by the offshore investor base.

It would be great if the semis had a liquid 20-30 year benchmark market. It comes back to issuers’ objectives and whether or not they want to avail themselves of the opportunity.

FAJARDO Prior to COVID-19, we tested liquidity in 15 years when we issued our 2034. The market was already available out to 15 years. Beyond 15 years, it feels a bit more opportunistic in nature, and we are probably yet to see the depth of investors that would provide ongoing liquidity to support regular benchmark-style issuance. But we are heading in the right direction.

WHEADON It didn’t all happen straight away for us. When we pushed the curve out to 30 years it took a good couple of years for this part to mature and function normally. When we launched our first 30-year bond in 2016 – and for several years after – a few small flows on a given day could really push the curve around. We don’t see this anymore. From our perspective, it has matured, liquidity is consistently available and we don’t experience the same volatility.

BLUNT We provide strong secondary liquidity in labelled bonds, and the bid and offer side are both important. QTC and TCorp are building up their lines to the point where they have a tangible curve that is trading quite actively. There is still a long way to go but labelled issuance remains in a strong position.

As Dan said, issuers need to be selective as they build up their asset pools. They cannot respond to reverse enquiry all the time but instead they need to grow with these programmes as they evolve. Issuers need to be realistic about liquidity. It is better than it was 12 months ago, and I have no doubt it will continue to improve.

ZUVICH No, we just treat it as a normal bond line that will grow over time. Traditionally, our bonds tend to grow over the five years from the first print. After this, they tend to stay around the same volume until we start refinancing. Our green asset pool is growing from new government initiatives, but the actual expenditure that is occurring is not as quick as we anticipated.

GEDDES It is a good point on government expenditure. Whether we are talking about the Queensland energy and jobs plan or what is happening in NSW and Victoria, capacity building is allowing more sustainability issuance – and this helps the bonds behave a bit more like their vanilla counterparts in the secondary market.

Meanwhile, investors are looking at issuers more holistically and are not differentiating what they are trading as much as they used to – apart from when they have specific funds. This has been another healthy development.