(Australia) – Australia’s Commonwealth Treasurer, Mr Peter Costello has confirmed that the Government is retaining a Commonwealth bond market notwithstanding declining Commonwealth debt and an earlier desire to withdraw from the market.Financial market participants have been aggressively lobbying for the Government to remain an issuer and avoid the expected adverse impact such a move would have been expected to have on the capital markets’ continued efficient operations and future development.
The Commonwealth is now looking to maintain liquidity in the three year and ten year bond futures contracts by issuing similar dated Commonwealth Government Securities (CGS), key components of interest rate risk management in the bond markets.
Rating agency Standard & Poor’s, for example, sees a “liquid and diverse bond market to be an integral component of the overall soundness of the Australian financial markets. Companies, financial institutions, and institutional investors will benefit from a liquid bond market to manage funding and credit risks.”