WHEADON The linker market has remained functional over the past year with reasonable liquidity but sometimes inconsistent demand.

We conducted a roundtable recently, where we brought the buy and sell sides together with a view to exploring ideas that might help improve functionality. The key takeaway message for us was that a more flexible approach to issuance was warranted. We responded to this in our last market update by announcing a wider target issuance range, of A$2-4 billion (US$1.3-2.6 billion) instead of the more usual A$2-2.5 billion we have used in recent years. The signal here is that, if there is demand, the AOFM is prepared to respond to it.

Also on the flexibility theme, we recently ran a dual-line tender for the first time in more than a decade. If our liaison with investors and intermediaries uncovers good interest in different segments of the curve leading into tenders, as was the case here, we will respond accordingly.

Our commitment to the linker market is the same as it has always been. It is not a large proportion of our portfolio – about 5-6 per cent – but it is an important product for many investors, particularly in the domestic market.

WHEADON Pleasingly, there have been several new entrants to the market over the last year. I think there continues to be a good case for investing in linkers, including what should be attractive running yield in the current environment. I would not be surprised if more investors became involved.

BLUNT Flexibility is everything. We are going through a period where inflation protection is necessary at times, and this is reflected in some mandates. I think there are parallels to the green conversation: we need more liquidity in linkers.

In saying this, I think the AOFM’s response has been excellent. To be able to respond to demand for inflation protection and slowly build up liquidity will be very effective for the market.