(Bloomberg) — The Australian rates market is signaling that the demand for the nation’s sovereign bonds has slumped to a record low relative to supply, underscoring investor concern over heavy debt issuance.
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The spread between 10-year interest-rate swaps and similar-tenor bond futures slid to negative 14.75 basis points this week, the lowest in Bloomberg-compiled data going back to 1998. That gap is often seen as a gauge of the demand for debt as swaps and bond futures typically move in tandem, unless there is a bond-supply risk.
The nation’s 10-year yields rose to the highest in a month after the Australian Office of Financial Management said it plans to issue about A$150 billion ($94.4 billion) of government bonds in the 12 months ending June 2026. That’s higher than the revised projection of A$100 billion for the current fiscal year.
Increasing government bond supply into fiscal year ending June 2026 has been helping put downward pressure on spreads, said Ken Crompton, head of rates strategy at National Australia Bank Ltd.
“The combination of flows and higher issuance points to spreads remaining tight,” he said, adding that “The swap spread curve will thus remain inverted.”
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