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Foreign Bond Holders Take Aussie Bond Holdings to the Lowest Level in 2.5 Years

“Foreigners’ holdings of Australian government securities fell to the lowest proportion of the total in 2 1/2 years, as an improving global outlook damped demand for the safety of the top-rated debt.

Offshore holdings declined to 68.9 percent of total outstanding debt as of March 31, down from 70 percent three months earlier and the least since the third quarter of 2010, according to government data compiled by Bloomberg. Non-residents owned A$206.4 billion ($200.8 billion) worth of government bonds and bills, down from A$207 billion at the end of the prior quarter.

Australian government bonds fell for a second quarter in the three months ended March 31, the first back-to-back declines since the first half of 2009. Foreign holdings of the nation’s debt peaked at a record 77 percent in June 2012, up from 59 five years earlier, boosted by purchases from foreign central banks.

“The magnitude of those flows are a lot less than they perhaps were a couple of years ago,” said Sally Auld, a Sydney-based interest-rate strategist at JPMorgan Chase & Co. “That’s consistent with this idea that central banks have moved from the build-up phase of their portfolio in Aussie bonds to a maintenance phase.”

Offshore demand for Australian government securities remains strong, with foreign central banks holding notes across the yield curve, Rob Nicholl, head of the Australian Office of Financial Management, said today in Sydney.

Price Declines…”

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