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					Australian Government Securities

           June 2010
                                                                                                                            2



Gross issuance of Australian Government Bonds
          100                                                                                  100
                             Gross Bond Issuance    Underlying Cash Balance
               80                       Forecast                                               80

               60                                                                              60

               40                                                                              40

               20                                                                              20
   $ billion




                                                                                                    $ billion
                0                                                                              0

               -20                                                                             -20

               -40                                                                             -40

               -60                                                                             -60

               -80                                                                             -80
                     2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14


                                                                       Source: Australian Office of Financial Management, Treasury
                                                              3



Australian Government Budget Balance




    Underlying cash balance projected to 2020-21   Source: Treasury
                                                                                                                      4



                        Australian Government net debt
      Per cent of GDP                                                                    Per cent of GDP
8                                                                                                               8
                                                   Forecast


6                                                                                                               6


4                                                                                                               4


2                                                                                                               2


0                                                                                                               0


-2                                                                                                              -2


-4                                                                                                              -4


-6                                                                                                              -6
     Jun-01    Jun-03   Jun-05   Jun-07   Jun-09     Jun-11   Jun-13   Jun-15   Jun-17   Jun-19   Jun-21


                          Government net debt projected to 2020-21                                         Source: Treasury
                                                                                                     5



                          Net Government Debt
      Per cent of GDP                                 Per cent of GDP
160                                                                                     160
              2009      2010     2011   2015

140                                                                                     140

120                                                                                     120

100                                                                                     100

 80                                                                                     80

 60                                                                                     60

 40                                                                                     40

 20                                                                                     20

  0                                                                                     0
      Australia Canada Germany     UK   France   US   Italy         Japan
                                                              Source: Treasury, IMF World Economic Outlook
                                                                                                                                                                                                   6



                                                                  Sovereign Debt and Budget Position
                                  17.5
                                  15.0   Less Risk

                                  12.5                                                      Norway
Sovereign Budget Position % GDP




                                  10.0
                                   7.5
                                   5.0
                                              Australia
                                   2.5       (2013-14)

                                   0.0
                                                                                             Germany
                                                          China     Denmark
                                  -2.5
                                              Australia
                                  -5.0       (2010-11)            Sweden   Finland                      Canada                  Italy

                                  -7.5                                             Netherlands         France
                                                                                                                                                                Japan
                        -10.0                                                       Spain                   US
                                                                                                                                                                                      More Risk
                        -12.5
                                                                               Ireland           UK                          Greece
                        -15.0
                                         0                 25                 50                 75               100          125      150             175                   200                   225
                                                                                                                Sovereign Debt % GDP




                                                                                                                                              Source: Bloomberg, Reuters, CIA World Factbook, Treasury
                                                                                                                                                                     7


                                     Net debt and Bonds outstanding
                                                        Per cent of GDP
     Per cent                                                                                                                               Per cent
14                                                                                          Forecast                                                         14
                         Bonds Outstanding % GDP
12                                                                                                                                                           12
                         Net Debt % GDP
10                                                                                                                                                           10

 8                                                                                                                                                           8

 6                                                                                                                                                           6

 4                                                                                                                                                           4

 2                                                                                                                                                           2

 0                                                                                                                                                           0
       Jun-01


                Jun-02


                            Jun-03


                                      Jun-04


                                               Jun-05


                                                        Jun-06


                                                                 Jun-07


                                                                          Jun-08


                                                                                   Jun-09


                                                                                            Jun-10


                                                                                                       Jun-11


                                                                                                                      Jun-12


                                                                                                                                   Jun-13


                                                                                                                                                Jun-14
-2                                                                                                                                                           -2

-4                                                                                                                                                           -4

-6                                                                                                                                                           -6



                                                                                                                Source: Australian Office of Financial Management, Treasury
                                                                                                                                       8



                  Australian Government Bonds on Issue
      $ billion                                                                                                  $ billion
200                                                                                                                               200
                                                                       Forecast

180                                                                                                                               180

160                                                                                                                               160

140                                                                                                                               140

120                                                                                                                               120

100                                                                                                                               100

 80                                                                                                                               80

 60                                                                                                                               60

 40                                                                                                                               40

 20                                                                                                                               20

  0                                                                                                                               0
      Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

                                                                                  Source: Australian Office of Financial Management, Treasury
                                                                                          9




Australian Government Securities
              14 May 2010


         Treasury Bonds
         AUD 119.3 billion on issue


     Treasury Indexed Bonds
         AUD 10.8 billion on issue


         Treasury Notes
         AUD 11.1 billion on issue




                                      Source: Australian Office of Financial Management
                                                                                                                     10




      Projected issuance and Budget funding

Projected Bond Issuance and Net Funding ($ billion)
                                      2009-10    2010-11     2011-12             2012-13                 2013-14
 Gross issuance of bonds                59.1       60.0        25.0                29.5                    21.0
 Net increase in Treasury Notes         -5.9       14.2
                                        53.2       74.2       25.0                   29.5                    21.0
 less
 Bond maturities                         6.7          19.5    14.1                   29.9                    27.9
 Net increase in RMBS                    2.6           4.5    -2.7                   -2.8                    -2.7
 Other                                 -15.3           2.2    -1.0                    0.2                    -0.1
 Financing of headline cash balance     59.2          48.0    14.6                    2.2                    -4.1




                                                               Source: Australian Office of Financial Management, Treasury
                                                                                                    11




                Planned Bond Issuance


Planned gross issuance of bonds ($ billion)
                                              2009-10   2010-11

         Treasury Bonds                        53.0      56.0
         Treasury Indexed Bonds                 6.1       4.0
                                               59.1      60.0




                                                          Source: Australian Office of Financial Management
                                                                                                                                               12




                          Treasury Bonds at June 2010
     $ billion
18
                                                                                Projected Treasury Bond issuance 2009-10

16                                                                              Treasury Bonds outstanding end June 2009


14

12

10

8

6

4

2

0
      Aug-10     Jun-11   Apr-12   Nov-12   May-13   Dec-13   Jun-14   Apr-15   Feb-17   Mar-19     Apr-20       May-21          Jul-22



                                                                                                     Source: Australian Office of Financial Management
                                                            13



                   Treasury Bonds
• Issuance for the upcoming year will be approximately
  $56 billion in face value terms
• Four new Treasury Bonds are planned to be issued in
  2010-11
• They are expected to have the following maturities:
  Nov 2014, Jun 2016, Feb 2023 and Mar 2025
• The AOFM will continue to build up the liquidity of its
  outstanding lines
• It is expected that by June 2011 there will be eleven
  bond lines with over $10 billion or more on issue
                                                                                                                             14



                                Treasury Bond turnover
         $ billion                                                                                $ billion
180                                                                                                                      180

160                                                                                                                      160

140                                                                                                                      140

120                                                                                                                      120

100                                                                                                                      100

80                                                                                                                       80

60                                                                                                                       60

40                                                                                                                       40

20                                                                                                                       20

 0                                                                                                                       0
                                                 Apr 2009




                                                                                                              Apr 2010
                                                            Jul 2009
      Jul 2008




                                                                       Oct 2009
                     Oct 2008




                                 Jan 2009




                                                                                  Jan 2010
                                            Monthly Turnover Volume                    Source: Reserve Bank of Australia
                                               0
                                                   2
                                                       4
                                                           6
                                                               8
                                                                   10
                                                                        12
                                                                             14
                                                                                  16
                                                                                       18
                                     Jan-08
                                    Feb-08
                                                                                        $ billion

                                    Mar-08
                                    Apr-08
                                    May-08
                                    Jun-08
                                      Jul-08
                                    Aug-08
                                    Sep-08
                                    Oct-08
                                    Nov-08
                                    Dec-08
                                     Jan-09
                                    Feb-09
                                    Mar-09
                                    Apr-09
                                    May-09
                                    Jun-09
                                      Jul-09




  Monthly Turnover Volume
                                    Aug-09
                                    Sep-09
                                    Oct-09
                                    Nov-09
                                                                                                    Treasury Bond repo activity




                                    Dec-09
                                     Jan-10
                                    Feb-10
                                    Mar-10
                                    Apr-10
                                                                                                                                  15




Source: Reserve Bank of Australia
                                                                                                                                 16



                                   Sovereign yield curves
                       Australia          Canada         Japan         UK          Eurozone          US
       Per cent                                                                                                  Per cent
6.00                                                                                                                         6.00

5.50                                                                                                                         5.50

5.00                                                                                                                         5.00

4.50                                                                                                                         4.50

4.00                                                                                                                         4.00

3.50                                                                                                                         3.50

3.00                                                                                                                         3.00

2.50                                                                                                                         2.50

2.00                                                                                                                         2.00

1.50                                                                                                                         1.50

1.00                                                                                                                         1.00

0.50                                                                                                                         0.50

0.00                                                                                                                         0.00
        3m        6m   1yr         2yr   3yr       4yr   5yr     6yr   7yr   8yr        9yr   10yr        11yr     12yr


                                                                                                                       Source: Bloomberg
                                                                                                                 17



                          5yr sovereign bond spreads
                               AUS vs US 5 yr Bond Spread              AUS vs UK 5 yr Bond Spread
                               AUS vs CANADA 5 yr Bond Spread          AUS vs JGB 5 yr Bond Spread
               600                                                                                          600

               550                                                                                          550

               500                                                                                          500

               450                                                                                          450

               400                                                                                          400

               350                                                                                          350




                                                                                                                     Basis Points
Basis Points




               300                                                                                          300

               250                                                                                          250

               200                                                                                          200

               150                                                                                          150

               100                                                                                          100

                50                                                                                          50

                 0                                                                                          0
                 2004   2005                  2006              2007    2008                  2009   2010



                                                                                                       Source: Bloomberg
                                                                                           Basis Points




                                                                                             20
                                                                                                    40
                                                                                                          60
                                                                                                               80




                                                                                       0
                                                                                                                    100




                                                                     -60
                                                                           -40
                                                                                 -20
                                                         Oct-2008


                                                         Nov-2008

                                                         Dec-2008


                                                         Jan-2009
                                                                                                                          vs. US




                                                         Feb-2009

                                                         Mar-2009


                                                         Apr-2009

                                                         May-2009
                                                                                                                          vs. UK




                                                         Jun-2009

                                                          Jul-2009


                                                         Aug-2009


                                                         Sep-2009
                                                                                                                          vs. Japan




                                                         Oct-2009


                                                         Nov-2009

                                                         Dec-2009


                                                         Jan-2010
                                                                                                                                        Spreads for 5yr Australian CDS




                                                         Feb-2010
                                                                                                                          vs. Germany




Spread between 5yr Australian CDS and other sovereigns


                                                         Mar-2010


                                                         Apr-2010

                                                         May-2010
                                                                                       0
                                                                                             20
                                                                                                    40
                                                                                                          60
                                                                                                               80




                                                                     -60
                                                                           -40
                                                                                 -20
                                                                                                                    100




                                                                                           Basis Points
                                                                                                                                                                         18




Source: Bloomberg
                                                                             19



                 Treasury Indexed Bonds
• TIBs are inflation-indexed bonds whose capital value is linked
  to quarterly movements in the CPI (with a floor to preserve
  value)

• Currently there are four bond lines with 2010, 2015, 2020 and
  2025 maturities

• In 2010-11 a new 2030 line will be introduced extending the
  TIBs curve out to 20 years
   – The initial issue is likely to be conducted via a syndicated offering


• Issuance in 2010-11 is expected to total around $4 billion
  (nominal face value), with regular planned auctions in most
  months
                                                                                                            20



    Treasury Indexed Bonds planned issuance
    $ billion
6
        Projected TIB issuance 2010-11
        Projected TIBs on issue end June 2010
5



4



3



2



1



0
          Aug-10             Aug-15             Aug-20   Sep-25             Oct-30
                                                                  Source: Australian Office of Financial Management
                                                                                                                                                           21



                          Turnover of Treasury Indexed Bonds
         $ billion                                                                                                                    $ billion
16                                                                                                                                                         16

14                                                                                                                                                         14

12                                                                                                                                                         12

10                                                                                                                                                         10

8                                                                                                                                                          8

6                                                                                                                                                          6

4                                                                                                                                                          4

2                                                                                                                                                          2

0                                                                                                                                                          0
                     Oct 2007




                                                                   Oct 2008




                                                                                                               Oct 2009
                                Jan 2008




                                                                              Jan 2009




                                                                                                                               Jan 2010
                                           Apr 2008




                                                                                                                                                Apr 2010
                                                                                         Apr 2009


                                                                                                    Jul 2009
     Jul 2007




                                                        Jul 2008




                                                      Monthly Turnover Volume                                             Source: Reserve Bank of Australia
                                                                                                                                                                                                                   22



            Treasury Indexed Bonds repo activity
      $ billion
2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0
                                                                                        May-09
                                                                               Apr-09




                                                                                                                                                                                           Apr-10
                                                                      Mar-09




                                                                                                                                                                                  Mar-10
       Aug-08




                                                             Feb-09




                                                                                                                   Aug-09




                                                                                                                                                                         Feb-10
                                                                                                 Jun-09
                Sep-08




                                                                                                                            Sep-09
                                                                                                          Jul-09
                                  Nov-08




                                                                                                                                              Nov-09
                         Oct-08




                                                                                                                                     Oct-09
                                           Dec-08




                                                                                                                                                       Dec-09
                                                    Jan-09




                                                             Monthly Turnover Volume                                                                            Jan-10                 Source: Reserve Bank of Australia
                                                                                               23




                      Treasury Notes


• Treasury Notes are short term instruments used to manage the
  Government’s short term cash flows

• Terms mostly no longer than six months

• Currently AUD 11.1 billion on issue*




                                                           * As at 14 May 2010


                                                     Source: Australian Office of Financial Management
                                                                          24


        Treasury Notes on Issue
                    14 May 2010
        $ million
3,000




2,500



2,000



1,500



1,000



 500



   0



                                  Source: Australian Office of Financial Management
                                                                                                                                                                                                                                                         25



Non-resident holdings of Australian Government securities
                                         140                                                                                                                                                             100
                                                                 Total CGS (LHS)




                                                                                                                                                                                                                  Share of Foreign Holdings (per cent)
                                                                                                                                                                                                         90
  Market Value of Holdings ($ billion)




                                         120                     Non-resident holdings (LHS)
                                                                 Proportion held by non-residents (RHS)                                                                                                  80
                                         100                                                                                                                                                             70
                                                                                                                                                                                                         60
                                          80
                                                                                                                                                                                                         50
                                          60
                                                                                                                                                                                                         40

                                          40                                                                                                                                                             30
                                                                                                                                                                                                         20
                                          20
                                                                                                                                                                                                         10
                                           0                                                                                                                                                             0
                                                          Dec 2003


                                                                                Dec 2004


                                                                                                      Dec 2005


                                                                                                                            Dec 2006


                                                                                                                                                  Dec 2007


                                                                                                                                                                        Dec 2008


                                                                                                                                                                                              Dec 2009
                                               Jun 2003


                                                                     Jun 2004


                                                                                           Jun 2005


                                                                                                                 Jun 2006


                                                                                                                                       Jun 2007


                                                                                                                                                             Jun 2008


                                                                                                                                                                                   Jun 2009
                                                                                                                                                                                     Source: Australian Office of Financial Management
                                                                                               26




                                       Disclaimer



       The views expressed in this publication are commentary only, and should
                              not be considered as advice.
      You should not act in reliance upon the views expressed in this publication, but should
                  seek independent advice in relation to these issues.
        The Commonwealth of Australia and the authors disclaim responsibility for loss or
damage suffered by any person relying directly, or indirectly, on this publication, including in
                       relation to negligence or any other default.
Appendix
                                                                                                                                28


             Australian Government Bonds on issue at 14 May 2010

                    Treasury Bonds:
                                          Volume Outstanding (AUD)   Yield (%)   Duration (yrs)

                  5.25% 15 August 2010          7,603,500,000          4.46          0.22
                   5.75% 15 June 2011          11,198,687,000          4.37          1.01
                   5.75% 15 April 2012         14,055,000,000          4.65          1.78
                4.75% 15 November 2012          4,700,000,000          4.92          2.32
                    6.50% 15 May 2013          15,498,400,000          4.95          2.70
                5.50% 15 December 2013          2,250,000,000          5.10          3.14
                   6.25% 15 June 2014          11,299,000,000          5.12          3.49
                   6.25% 15 April 2015         11,248,000,000          5.20          4.18
                 6.00% 15 February 2017        11,748,000,000          5.36          5.44
                  5.25% 15 March 2019          10,397,500,000          5.41          6.91
                   4.50% 15 April 2020          7,447,000,000          5.45          7.77
                    5.75% 15 May 2021           9,600,000,000          5.48          8.10
                    5.75% 15 July 2022          2,300,000,000          5.54          8.46

                Treasury Indexed Bonds:
                                          Volume Outstanding (AUD)   Yield (%)   Duration (yrs)

                  4.00% 20 August 2010           736,265,000           1.48          0.26
                  4.00% 20 August 2015          2,695,800,000          2.37          4.77
                  4.00% 20 August 2020          2,773,200,000          2.59          8.55
                3.00% 20 September 2025         4,610,000,000          2.65          12.30


                                      Interest Withholding Tax
Commonwealth Government Securities are exempt from non-resident Interest Withholding Tax.
   More information is available from: http://www.aofm.gov.au/content/notices/27_2009.asp

                                                                                      Source: Australian Office of Financial Management
                                                                           29



               Australian dollar exchange rates
    150                                                            150
    140                                                            140
    130                                                            130
    120                                                            120
    110                                                            110
    100                                                            100
     90                                                            90
     80                                                            80




                                                                          Index
Index




     70                                                            70
     60                AUD vs USD     AUD vs GBP                   60
     50                AUD vs EURO    AUD vs JPY                   50
     40                                                            40
     30                                                            30
     20                                                            20
     10                                                            10
      0                                                            0
        2004    2005           2006         2007   2008   2009


                                                                 Source: Bloomberg
                                                                                                 30



                                Further Information

Website:     www.aofm.gov.au                             Easy access to quoted yields:
                                                         Web
Address:     Australian Office of Financial Management
             Treasury Building, King Edward Terrace      www.rba.gov.au
             Parkes ACT 2600 Australia                   Bloomberg
                                                         ACGB Govt
Ian Clunies-Ross, Head - Investor Relations
                                                         Thomson Reuters
           • Phone: +61 2 6263 1163
           • Email: Ian.Clunies-Ross@aofm.gov.au         0#AUTSY= (for nominal bonds)
                                                         RBA29 or AU/ILB1    (for index bonds)
Gerald Dodgson, Head - Treasury Services
           • Phone: +61 2 6263 1141
           • Email: Gerald.Dodgson@aofm.gov.au

Fax:         +61 2 6263 1222

				
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