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Australia Sells A$11 Billion of Bonds in Biggest-Ever Sale

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  • Australia Sells A$11 Billion of Bonds in Biggest-Ever Sale

Australia’s government sold A$11 billion ($8.5 billion) of 11-year debt notes in its biggest-ever bond transaction, as investors hungry for higher yields set aside concerns stubborn budget deficits will cost the nation its AAA credit rating.

It’s the third time in less than six months the South Pacific country has set a new borrowing record. It exceeds the A$9.3 billion issued at a sale of December 2021 notes last month and the A$7.6 billion from last October’s debut 30-year deal. The November 2028 securities were priced to yield 3.005 percent, the Australian Office of Financial Management said Wednesday.

The government has been ramping up issuance as it struggles to rein in its budget deficit and seeks to finance a debt pile that’s expected to top A$600 billion in 2020. Investors have been clamoring for Aussie debt even as tighter U.S. monetary policy drives a slump in global bond markets. The size of Wednesday’s sale shows that concerns about Australia’s capacity to keep its top credit score are being set aside as the nation’s relative prudence and weaker economic outlook makes the debt look attractive relative to U.S. Treasuries, according to Robert Mead, managing director at Pacific Investment Management Co. in Sydney.

“You’re looking at a bond that’s gone from nothing to a benchmark in one day,” Mead said. He said before the announcement there was more than A$20 billion of demand for the offering.

While ratings companies refrained from taking action following December’s mid-year budget update, S&P Global Ratings has had a negative outlook on the country since July. Treasurer Scott Morrison is scheduled to hand down his next fiscal plan in May.

The new bond will eventually roll into the basket of securities underpinning the ASX 10-year futures contract that is, along with similar three-year and 20-year products, a major fixed-income derivative Down Under. The basket currently includes notes with maturities ranging from April 2026 to May 2028.

The benchmark 10-year rate has held within a range of 2.63 percent to 2.83 percent this year, following the global bond market selloff late in 2016 that was spurred by Donald Trump’s election as U.S. president and the prospect of Fed policy tightening. It was at 2.83 percent as of 3:18 p.m. in Sydney.

The face value of federal government securities is expected to reach A$498 billion by the end of June and rise to A$604 billion in the 2019-20 financial year. The government’s net debt is predicted to peak at 19 percent of economic output in 2018-19 after climbing to 18.1 percent in the current fiscal year, according to official projections.

The 2028 bond has a coupon of 2.75 percent and the transaction was managed by Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, Deutsche Bank AG and Westpac Banking Corp.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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