Australia Raises A$2.1 Billion at Inflation-Linked Sale

Australia extended its inflation-linked bond maturities to 22 years, selling A$2.1 billion ($2 billion) with the yield at the bottom of the target range.

The 2 percent security due Aug. 21, 2035, sold at a price of A$96.943 per A$100 face amount, according to an e-mailed statement today from the Australian Office of Financial Management. That equates to a spread of 25 basis points over existing 2030 notes tied to consumer prices, data compiled by Bloomberg show. The government said yesterday it was targeting a premium of 25 basis points to 29 basis points. The yield to maturity was 2.2 percent.

This year has been the worst on record for investors in Australian inflation-protected securities, which have lost 4 percent, according to Bank of America Merrill Lynch data that go back to 1997. Australian inflation has held within the central bank’s target range of 2 percent to 3 percent this year.

“We didn’t think the issue would go this well,” said Peter Jolly, head of market research for National Australia Bank Ltd. in Sydney, the nation’s largest bank measured by assets. “There was very strong demand. There’s not an inflation issue in Australia now. But you’re not buying it for inflation insurance today. You’re buying it for the next 22 years.”

The yield on Australia’s 2030 linker, previously the longest-maturity federal bond, rose 86 basis points this year to 1.91 percent as of 4:54 p.m. in Sydney, Bloomberg-compiled data show.

The AOFM said yesterday the offering would be at least A$500 million. The sale was managed by Bank of America Merrill Lynch, Deutsche Bank AG and Westpac Banking Corp.

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