NICHOLL Liquidity completely disappeared in March. It began to reappear in Australia in early April, in concert with the RBA [Reserve Bank of Australia] beginning to buy bonds as part of its market-clearing operations.

When we first regained access to the market we were issuing very short duration, which is consistent with most issuers’ approach. There was a complete lack of appetite for duration at that point in time.

We monitored conditions and tracked the recovery as it unfolded. This allowed us to follow the recovery out with our issuance until we observed liquidity in the 10-year futures part of the curve returning to something close to normal.

The process took 6-8 weeks. We were able to test the market in mid-April when we did a syndication for a new four-year bond. In mid-May, we did a new 10-year syndication. These transactions in particular were very important for us – to get a window into what was happening in the market in the early phase of recovery.

We were also faced with a completely unprecedented increase in our funding task in a short period of time. This forced us to take a no-risk approach to getting cash in the door and managing liquidity risk.

As the months passed we saw that the financing task would be manageable and this meant we could relax our liquidity-risk reduction strategy and move more towards re-engaging in a pattern of issuance more in line with a portfolio strategy.

NICHOLL The offshore investor base has been important to us for a long time, although we saw offshore investors re-engage with the market later than domestic investors. This was mostly down to them being in lockdown and containment situations themselves as well as facing their own domestic market challenges.

We have seen an increase in offshore interest, though. There has been a recent surge in Japanese allocation to the Australian dollar market, for us and the semi-governments.

From our syndication statistics, even the 2024 bond showed a higher allocation to offshore investors than the average for all of our past syndications, except the 2047 transactions in 2016. This suggests a step-change in offshore participation has taken place.

The offshore investor base is very important for the long end of our curve and our 2051 syndication showed this. There was a strong return to interest in the AOFM doing a 30-year benchmark and close to two-thirds was allocated offshore.

NICHOLL From March to May, there was frequent interaction between the AOFM and the RBA with the key objective being at first for the RBA to understand our read on the market and how we thought it would respond to operations to remove congestion.

As RBA operations began to take affect and the market regained its footing, the need for us to be in regular communication diminished. We let them know in advance when we planned to do large syndications, though.

There has been little to no discussion with the RBA about three-year yield-curve control. We see this as independent of what we are doing and we have not been a large volume short-end issuer for the last 5-6 years anyway.

I believe the communication we had with the RBA was highly effective and functional, but it was done from the perspective that we were operating independently of one another.

NICHOLL There is no doubt that there is appreciable interest in the five-year part of the curve and I think this has been driven in part by three-year yield-curve control. The curve steepens past three years and there is attraction for some investors to buy 1-2 years out from the three-year, knowing yield will roll toward the RBA’s yield target.

There is probably diminished interest in the three-year part as a result, too. A lot of investors like some volatility and uncertainty – it is where traders tend to make their mark.