Queensland, Australia’s biggest state borrower, completed more than half of its 2011-2012 financing program before Europe’s sovereign-debt crisis escalated, Treasurer Andrew Fraser said.
Funding arm Queensland Treasury Corp. estimated in July it needs to raise A$22 billion ($22 billion) in the 12 months to June 30, 2012. Victoria, with the third-biggest pile of debt outstanding among Australian states, has completed 66 percent of its requirement and won’t need to access markets till March or later, the agency said. The extra yield investors demand to hold notes issued by regional authorities over federal debt widened to the most in 2 1/2 years this month, Bank of America Merrill Lynch data show.
“The uncertainty in Europe means it’s a challenging time for markets everywhere,” Fraser said yesterday in an e-mailed response to questions. “QTC completed over half of its 2011-12 borrowing program before the overseas sovereign debt concerns began to dominate market sentiment.”
The extra yield Queensland’s 6.25 percent note maturing in February 2020 offers over 10-year Australian government bonds widened to 121.5 basis points on Nov. 24, the most since it was issued in February 2010, and was at 114 today. The state has A$72.6 billion in outstanding debt, Bloomberg data show.
The spread for Victoria’s 6 percent securities due June 2020 reached 83.6 basis points on Nov. 24, the most since December 2009, and was at 75 basis points today.
The additional yield investors demand to hold debt issued by Australia’s six states and two territories instead of sovereign securities increased to 99 basis points on Nov. 24, the most since March 2009, from 63 at the end of last month. The spread was at 96 on Nov. 29, Merrill Lynch indexes show.
“We really don’t need to come back to market until about March and we can probably avoid coming back even then if spreads are still abnormally wide, given that we have an amount of liquid assets in the portfolio,” Bill Whitford, managing director of Treasury Corp. of Victoria in Melbourne, said in an interview today.
As of Nov. 25, Victoria has raised A$4.3 billion of the approximately A$6.6 billion it requires, he said. The state has A$27.1 billion in debt outstanding, Bloomberg data show.
Investors have shunned all but the safest government bonds amid concern Europe’s debt woes are threatening the region’s largest economies including France and Italy.
Italy was forced yesterday to pay above the 7 percent threshold that prompted Greece, Portugal and Ireland to seek bailouts when it sold 7.5 billion euros ($10 billion) in bonds, short of the maximum target for the auction. Standard & Poor’s may give France a “negative outlook,” La Tribune reported, citing “several sources.”
Australian Treasurer Wayne Swan in March 2009 offered to guarantee state bonds to help regional governments raise funds after a similar cover for securities issued by banks amid the global credit crisis drove up borrowing costs for regional authorities.
Victoria didn’t use the guarantee in 2009 and wouldn’t need to use one now, Whitford said.
“The guarantee was implemented in 2009 after, and as a consequence of, the federal government’s guarantee of the wholesale funding of Australian banks,” Queensland Treasurer Fraser said. “These are not circumstances that pertain to current market volatility.”