WALLACE We began issuing in the Australian dollar market in 1996 and we sporadically issued between then and 2023, mostly on a private placement basis. This was mostly driven by investor demand out of Asia. Transaction sizes ranged from A$35 million (US$22.6 million) to A$300 million over this time period.

We printed one public transaction in the Australian dollar market, in 2010. But 2024 marked a step-change for us. The first development was that we started to pay a great deal of attention to the achievements of CPP Investments. The A$1.5 billion it issued via a 10-year bond in March this year really caught our attention.

We are a large, global issuer and we are always exploring different markets for opportunities. While the Australian dollar market had been very kind to us over the years, we are generally a large, benchmark issuer in any market we enter and historically we had not been transacting in benchmark size in Australia.

Witnessing CPP Investments’s achievements in tenor and size, and the fact that it was in the public market, really caught our attention. We thought it would be worthwhile attempting something similar and we were indeed able to achieve this in June.

We thank the Australian market, investors in particular, for giving us such a warm welcome. But full credit should go to CPP Investments for leading the charge. It caught our attention as well as that of a number of other provinces.

We typically have a large borrowing programme. This year it is C$37.5 billion (US$26.6 billion). When one approaches a programme of this size, one has to be sensitive of the extent to which the Canadian market will be able to bear it.

Typically, we try not to issue all our needs in our domestic market. We usually aim to issue around 25 per cent of our borrowing programme in foreign markets – but we have to bear in mind that not all of them are price-friendly all the time.

We are a big, consistent issuer and we have been in markets for decades. Investors know us and buy us, and we are on approved lists in many jurisdictions. Even so, part of our rationale for coming to the Australian market was to pick up new investors – to come to a place where we can access accounts that weren’t already familiar with us.

In this sense, foreign markets are a pressure relief valve for Canadian dollar funding for us. But accessing them is also prudent management. We do not wish to be beholden to, or depend on, a single market for all our issuance. It’s important that we are on approved lists and have recognition globally, and have outlets available so we have alternatives readily available if something is not working in our home market.

Australian dollar issuance is increasingly becoming one of these alternative funding options for us. When we put together a plan for foreign borrowing nowadays, we have to treat Australian dollars with serious intent.

In this context, the investor breakdown of the deal we did in 2024 was fascinating, in the sense that almost half of the issue went to central banks or official institutions. This is a great buyer base to access and tap into. Overall, it was a very positive result and one that certainly encourages us to look at the Kangaroo market again.

REN Diversification is clearly very important and it has been great that provinces have come to the market this year with big lines – substantial line volume is also positive for liquidity. But we don’t view it as genuine diversification if it is just a case of a single transaction. We also want to see a commitment to return to the Australian dollar market. Only then will we be able to gauge the true extent of liquidity.

Pricing or funding might be a more pressing concern for issuers, but we want commitment to the market. Again, what CPP Investments has achieved is a great example of this over the last couple of years.

MEDINA I agree. Central bank and official money has been sticky and this should offer confidence for issuers to return to the market.

From our perspective, issuer diversification is great for the market overall. We want to be able to create opportunities for our clients, whether it be for clients interested in spreads, relative value or the fundamentals of some of these Canadian issuers.

Issuer commitment is important but the way in which issuers communicate it is equally so. For example, distinguishing between core and noncore currencies can help a bond programme to perform well over time, offering more confidence to the investor.

REN We want commitment to the market and we also want to see evidence of this commitment. We have been speaking to many Canadian provinces through investor meetings, and commitment and diversification of investors have been key talking points.

What we want next is issuers returning to the market. If the issuance patterns that occurred in 2024 could repeat, it would send a signal to us that we can have more confidence in issuer rhetoric.

MEDINA Issuers need to be aware of the depth of demand in their home market and consequently consider other jurisdictions, like Australia, to issue in. The communication piece is really key – how issuers communicate about their programme and what they are doing in Australia. The size of the deals also matters, and ongoing programmatic issuance certainly helps with relative value.

Depending on the volume of issuance and of the Australian dollar programme there is going to be a spread to pay. It could certainly tighten because of Canadian fundamentals. However, there is a reason why spreads are wider – these names have to offer a level that is attractive. We want performance over time but also to maintain relative value. This balance will provide investors with assurance that issuers will return to the market and be able to tap into the pool of liquidity.

MEDINA We have heard anecdotally that larger volume lures in a range of investors looking for liquidity. This is really important to us. We manage passive funds in addition to active ones, and large lines are key for passive offerings. For issuers that have not always been in our portfolio, the difference between a A$1 billion deal and a A$200 million deal is large.

MEDINA We certainly consider the drivers of official institution participation, particularly whether the motivation is simply having new Australian issuance on their books, because yields are attractive or whether it is a switch out of government bonds. If an investor plans to hold on to the bonds, it provides other investors with confidence.

REN Central banks and official institutions represent stickier money and we tend to think of them more as a category of asset manager. In this respect, it is great to have these sorts of participants in books – regardless of their purpose.

WALLACE Because we have such a large and consistent borrowing programme every year, when we enter a market for the first time with a benchmark deal we are always aiming to build a presence in that market. What we are trying to identify is markets that are evolving and that could become more important to us.

Building a presence in a market is a partnership between issuers and investors – again, this has been demonstrated by CPP Investments and Australian dollars. In this context, the size of our first public benchmark issue bodes well for our future in the currency.

However, we have to acknowledge that sometimes markets can be faddish. We had been assessing the sterling market – which seemed robust to us, and where we have previously had strong outings. But more recently it has appeared more fickle; market dynamics have changed and it seems very volatile.

When one is executing a transaction across time zones and books are open for a significant period of time, including overnight when issuers can be blind to emerging news or geopolitical risk, a stable backdrop is key.

Our intention is certainly to come back to the Australian dollar market, given how positive our experience was in 2024. But there are a handful of variables to consider. Markets can change and often they can change quite dramatically. No issuer can say with 100 per cent confidence that they will be back in a particular currency market because we cannot predict what conditions will be like. But given how stable the backdrop was for us in Australian dollars, and how positive the experience was, a return to issuance is certainly appealing.

WALLACE Our deal certainly exceeded expectations: our final book was north of A$4 billion and we were able to bring our spread in by 2 basis points from initial price thoughts. We had 43 investors in the book across a great breadth and it checked all our boxes. We were very pleased with this given there is always an element of exploring uncharted territory when entering a new market with a large public deal.

We printed A$1.5 billion, which seemed like the right size for the transaction. We are very keen to ‘right-size’ deals, especially in foreign markets, because we want to ensure investors have a good experience and solid performance right off the bat.

As much as investors would like to see us return to Australian dollars, we would like to see investors return to our books. In this sense, our goals are aligned in that both sides wish to get the market up and running and functioning in a meaningful way.

Pricing worked for us, too. It’s also important to us that the swap market is stable and well-functioning – because we don’t need Australian dollars. In this case it was seamless. Our transition from private placements and pockets of demand out of Asia has gone very well, and the experience exceeded our expectations on every point we had on our checklist.

STESHENKO We are a consistent issuer in this market – we are not arbitrage-driven – and this has provided local and global investors with comfort that we will be committed and will continue to build out a liquid curve.

The success of this approach has been proved by spread compression in our lines, a diversified and consistent buyer base across regions and types, and the growth of our general presence in this market.

In our experience, building liquidity and curves helps spreads. We recently included a page in one of our investor decks about spread compression for our five- and 10-year lines versus our peers. Our January 2029 bond tightened by 23 basis points in the first nine months of the year, outperforming tier-one SSA names by roughly 8 basis points.

This is not just due to liquidity but also our clear and consistent message about being a programmatic issuer even when funding costs are higher than in other markets. This message is driving a lot of the performance, and it wouldn’t be possible without the global investor base.

WALLACE We were surprised by how many European investors there were in our book. We did not necessarily anticipate such a presence, though we have been issuing many bonds and we are on many approved lists. Providing a different currency was very well received.

While we picked up new investors, a lot of investors that we knew and which have partnered with us previously were also in the book. It was clear that they were excited to access something new in our name.

BATSMAN There has certainly been a normalisation of bank balance sheet demand over the past 12 months, as expected. There has also been a broad uplift in participation from all investor types, particularly from offshore, that isn’t concentrated in a certain region or a certain type of investor.

Overall, we are experiencing a greater allocation to offshore investors. This calendar year, almost 30 per cent of our syndicated issuance went to offshore investors versus less than 10 per cent in previous years.

Similar to our Canadian peers, we have welcomed about 20 new investors into our fixed-rate transactions this calendar year, and we recently issued a floating-rate note in which 15 new investors participated.

A statistic we continue to cite is that nearly half, or A$400 billion, of Australian Commonwealth government bonds (ACGBs) is owned by offshore investors but just 18 per cent, or A$100 billion, of semi-government bonds is owned by offshore accounts.

The most obvious group we as semi-government issuers can target is the investors that own ACGBs but not semis. While we do not expect to capture every dollar of the A$300 billion difference, it is reasonable to expect that we can attract a meaningful portion of these investors.

BUCKLEY We had been anticipating demand from ADIs [authorised deposit-taking institutions] would start to normalise so, over the last year, we have been focusing on engagement with a broader range of investors. Even though ADIs are still an important part of the market, their participation is slowing.

We have seen a redistribution of the percentage allocation of our fixed-rate syndicated deals away from domestic bank balance sheets to offshore investors. We issued a A$1.5 billion 2035 syndicated tap in July, for instance, and we got a 28 per cent offshore allocation. With our new 2037 benchmark, we achieved a 46 per cent offshore allocation.

The official statistics are still showing close to 70 per cent ownership of the semi market by ADIs and the Reserve Bank of Australia [RBA]. However, recent QTC [Queensland Treasury Corporation] issuance has shown a big uptick in offshore allocations as wider spreads and relative value, in tandem with engagement from the semi-government sector, have worked together. Confidence in the size and liquidity of the market has also increased.

HILL Transaction data from the Australian Bureau of Statistics for the semi sector as a whole confirms the presence of offshore buyers in the semi market. For example, data for the second quarter showed that around one-third of net purchases were from offshore buyers.

ONG During our offshore marketing this year – in particular in Europe and the UK but also in Asia and Japan – a lot of the investor base commented that the semi market is getting bigger and bigger. It was worth A$300 billion before COVID-19 but it has doubled since, and outstandings and issuance are growing further still. A lot of the offshore investors noted that semis are a large and growing part of the Australian market.

Meanwhile, semi-governments have cheapened up versus ACGBs, swaps and SSAs of late, particularly in the longer part of the curve. Curves are steep and the carry and roll-down is strong. There are a lot of reasons to be involved in the sector, including its increasing relevance within the overall fixed-income market in Australia.

VANSTONE With Canadian issuers now coming into the market, we have seen an increase in the number of offshore investors looking at Australian dollars. Canadian issuance in this market is very helpful for semi-government borrowers as it has led to greater global investor focus on Australian dollars.

BUCKLEY There is great diversity within the investor base, offshore as well as domestically. Domestically, the ADI bid is complemented by ongoing internalisation of investment processes by superannuation funds as well as fund manager interest. From offshore, we have increasing interest from hedge funds, banks and official institutions, sovereign wealth funds, and real-money global fund managers.

ONG Offshore investors are well aware of supply challenges, and the shift in supply and demand dynamics in the semi-government market. While there is increased demand in many areas, as the level of balance sheet demand of recent years moderates there remains a question about whether it will be enough.

There is increased demand for semis from Europe, including from the central bank community. Japan has been sitting on the sidelines with hedged costs hurdles that are too hard to meet and the Australian dollar-yen exchange rate too high. They have returned somewhat when yields have backed up. Super funds have the potential to buy a lot more semi-government bonds.

STESHENKO Yes, it does! The Australian dollar market is our second-biggest market after Canadian dollars. We issued A$4.2 billion in 2024, versus A$3.75 billion the previous year. We experienced consistent growth and we are hoping to maintain it going forward.

We have been very pleased with the depth available in Australian dollars. From an investor and liquidity perspective, we have continued to build out a curve and liquidity in our name has improved over the last few years. Liquidity has been a huge focus point for us as global investors have become accustomed to a certain standard of liquidity in our paper.

WALLACE One of our core currencies will always be US dollars. Euros is another core market for us, though to a slightly lesser extent than US dollars. After that, it’s open season. I would like to think, if Australian dollars continues to offer the kind of access we had this year, that it will be in the mix in our programme when we put it together at the beginning of each year.

BUCKLEY Numerous positive developments have contributed to the growth of the fixed-income market in Australia. We are attracting new investors. The size of the semi market is set to grow to A$800 billion of outstandings over the next 3-4 years, from about A$600 billion. Canadian and other SSA issuers are adding to the excitement as the market continues to grow.

The Australian dollar market is providing size, liquidity, relative value and other opportunities for investors, not just domestically but also offshore, including official institutions and bank balance sheets.

BATSMAN I agree. The development of the market is positive for issuers and investors – there are relative-value opportunities and issuers can print in size across the curve at competitive levels.

STESHENKO We have very recently started investing in the ACGB market. Prior to this, we specialised in public equity and private debt infrastructure. We are currently assessing the appropriateness of semi-governments for the portfolio as we seek to grow our Australian exposure.

BUCKLEY QTC has a bigger funding task because of the state government’s large infrastructure programme. In particular, this means energy transition and the decarbonisation of the state, and the strong increase in population that requires increased health and transport infrastructure.

Our borrowing programme will step up over the forward estimates: it was expected to average A$27.6 billion per annum over the next few years at the time of the last budget in June.

We are conscious not only of our increased borrowing and funding tasks but also the history of strong ADI demand that led us to market our bonds predominantly domestically. Over the last year, we have increased our investor engagement activities not just to existing investors but also to a broader sphere of investors domestically and offshore.

While the demand makeup is changing somewhat, the style of issuance isn’t. We issue predominantly in public format and primarily through syndications.

We issue a new benchmark line each year, supplemented by tenders and syndicated taps. We also harness reverse enquiry, particularly involving investors that cannot tailor or time their demand in line with our syndicated outings. We also issue short-term debt.

We also plan to continue our green issuance, given the nature of infrastructure investment in Queensland – it spans renewables, solar, wind and battery. We have an asset pool of about A$18.6 billion to accommodate this and we have A$12.7 billion of green bonds on issue. We are the largest Australian dollar green-bond issuer, and green bonds represent around 10 per cent of our issuance. We intend to continue to support this programme, which offers diversification away from our benchmark lines.

We also issue floating-rate notes (FRNs), and there has been an uptick in demand for our floating-rate paper because we have been marketing to a broader range of ADIs. Our latest FRN transaction – a four year – had 36 investors in the book versus 20 in our last issue, and 92 percent of the investors in the new book were ADIs.

In answer to your question, we remain a predominantly Australian dollar issuer including 70 per cent of what we issue being public. But we are open to non-Australian dollar issuance because we are always conscious of capacity in the domestic capital market.

We have issued in other currencies previously and we will continue to monitor markets. While pricing may have been a constraint six months ago – it was in the region of a 50 basis points cost – it is now becoming a more realistic proposition for us.

If this trend continues and the pricing differential narrows further, foreign currency is certainly an option for us. Canadian issuers have offered lessons around diversifying away from our predominant market.

BATSMAN We have a checklist of three considerations for issuing in foreign currencies before we can commit to doing so. One is the expectations of investors in any specific market – whether we would be an issuer printing throughout the cycle or coming to market for a one-off trade.

Cost relative to the domestic curve is another consideration. At the moment, the differential is still around 20-40 basis points away from our domestic cost of funds. Finally, we need to consider whether there are alternative funding sources available to us.

At the moment it is not a priority for us because we are not running into capacity constraints domestically just yet. Even with the balance sheet bid normalising, we had two of the largest orderbooks in our fixed-rate transactions this year – and we believe our peers are experiencing a similar thing. Global investors are now participating and actively considering the semi market, and this means foreign currency issuance is not a major consideration for us. We can be opportunistic, however.

BUCKLEY We have been active in thinking about and researching non-Australian dollar issuance. As we mature as an issuer – including having a consistently larger programme – we have to consider offshore borrowing. This would include being a committed, consistent and regular issuer in the markets we access.

The plan would be for foreign-currency issuance to be a noncore component, like our green-bond programme or FRN offerings. But it certainly offers a lever to take some pressure off the domestic market if needs be.

WALLACE This year has been extreme with regard to borrowing in foreign currencies. Pricing has worked in euros, US dollars, Swiss francs, Australian dollars and sterling. This has never happened before.

We have a similar checklist to what Yulia describes. We require various factors to align and the Australian swap market exemplified great depth in 2024. Some provinces use foreign markets to encourage performance in the domestic market. For us, it’s because pricing is often attractive in foreign markets. Having access to another investor base outside the home market is a really important consideration, too, particularly once a programme reaches a certain size.

During 2020/21, for instance, we borrowed C$59.8 billion – and we were able to lean on our foreign-currency programmes and market access to achieve this. It can act somewhat like an insurance policy.

STESHENKO For us, using global markets is about accessing global investors and market diversification, and maintaining a presence so as not to solely rely on one funding option. Markets have been volatile and issuance windows can be difficult to pinpoint.

MEDINA What the reserve bank does will be key. Everyone is waiting for the RBA to commence the cutting cycle or at least to reveal clues about what it might look like. We hear anecdotally that this would offer confidence to offshore investors.

It could be another really strong year for issuers to come to Australia and find investors offshore. Fixed income is still growing as yields remain high. On a spread basis, compared with global levels, the Australian market looks attractive. But a lot of SSAs might just not issue if the price of doing so is not right.

ONG Offshore investors are still asking whether a hike might be possible in Australia. This is clearly not the debate here. But some offshore investors hold this view so the first cut will be key for confidence.

BUCKLEY I believe 2025 will be another year of growth in the semi market. Net new issuance for the sector in 2024/25 is expected to total more than A$65 billion.

Pleasingly, we are still experiencing growing demand. We have had some volatility but there has not been a crisis and spreads are quite wide. We hope there are no major events and, if this is the case, it is looking like another solid year ahead.

REN I agree that it depends what the RBA does. The main driver will likely come from offshore investors.

BATSMAN The more diverse and larger the market becomes, the more positive the experience over the course of the calendar year. Hopefully these themes continue.

HILL Our view is that structurally higher supply is now in the price and 2025 will be about the evolution of demand. So far, the increase in foreign ownership has been encouraging and so has the increase in ownership by superannuation funds. These trends will be closely watched in the coming months.

WALLACE I anticipate, all things being equal, that we will be back in the Australian dollar market. We might take some advice on how to build out a curve and where investor demand is, and we’ll be looking to our leads to offer intelligence.

Otherwise, rates will continue to fall. The differential to the US is quite large already and our story will very much relate to what is happening in the US.

STESHENKO Our aim is to achieve consistent growth in the market. RBA stickiness may provide tailwinds overall for increased issuance growth. It may be challenging to repeat the success of 2024 but Canada Inc will do its best to have another strong year.