Foreigners Trim Aussie Bond Holdings to Least Since 2011

Foreign investors cut their holdings of Australian government securities to the lowest level in almost two years, as an improving global outlook damped demand for the safety of the top-rated debt.

Offshore holdings were equal to 70 percent of total outstanding debt as of Dec. 31, the least since March 2011, according to government data compiled by Bloomberg. Non- residents owned A$207 billion ($211.2 billion) of government bonds and bills, down from A$208.3 billion at the end of the third quarter, the first decrease since the period ended June 2008. Total outstanding debt rose to A$295.8 billion from A$287.5 billion.

“Better growth and better credit conditions probably mean investors looked to diversify from government bonds to other higher-yielding assets,” said Tony Morriss, head of interest- rate research at Australia & New Zealand Banking Group Ltd. in Sydney. “There’s no doubt the fourth-quarter percentage of debt held offshore has fallen, but it doesn’t feel like wholesale profit-taking. Overseas ownership in Australia still remains at very high levels.”

Foreign holdings of sovereign notes with maturities longer than a year fell to A$200.1 billion from A$202.7 billion on Sept. 30. The ratio of overseas ownership fell to 72.9 percent from 74.6 percent. Over the same period, Australian government bonds handed investors a 0.6 percent loss, the biggest slide since the three months ended December 2010, according to Bank of America Merrill Lynch index data.

A gauge tracking debt by state borrowers was little changed in the fourth quarter, while corporate securities climbed 2 percent, the Bank of America figures show.

Yields Climbing

Australia’s benchmark 10-year yield has risen this year by three basis points, or 0.03 percentage point, to 3.30 percent today. The yield climbed 29 basis points in the three months ended Dec. 31, having touched an all-time low of 2.698 percent on June 4.

The Australian dollar has fallen 1.9 percent in 2013 to $1.0202 as of 1:59 p.m. in Sydney as demand from abroad for the South Pacific nation’s debt eased. The so-called Aussie dollar climbed 1.8 percent in 2012 and reached $1.1081 on July 27, 2011, the highest since exchange-rate controls were scrapped in 1983.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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