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

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An Australian one hundred dollar
  • 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 Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns

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Crude oil

Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.

Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.

The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.

This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.

While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.

Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.

Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.

Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.

Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.

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Crude Oil

Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm

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Dangote Refinery

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.

Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.

The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.

However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.

Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.

He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.

Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.

The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.

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Energy

NNPCL Pledges End to Nigeria’s Energy Scarcity Within a Decade

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Mele Kyari - Investors King

The Nigerian National Petroleum Company Limited (NNPCL) has announced a bold initiative aimed at ending Nigeria’s persistent energy scarcity within the next decade.

Mele Kyari, the Group Chief Executive Officer of NNPCL, revealed this ambitious plan during the opening ceremony of the seventh Nigerian International Energy Summit in Abuja.

Kyari’s announcement comes as a beacon of hope for millions of Nigerians grappling with chronic power shortages and energy deficiencies.

In his statement, Kyari expressed confidence that all issues related to energy scarcity in the country would be resolved within the next 10 years.

Assuring stakeholders of NNPCL’s unwavering commitment, Kyari emphasized the company’s dedication to collaborating with partners to bridge the energy deficit gap and foster prosperity for all Nigerians.

He highlighted NNPCL’s pivotal role as a key partner to oil-producing companies in Nigeria, facilitating the divestment of international oil companies from onshore and shallow water assets in the country.

Furthermore, Kyari underscored NNPCL’s statutory mandate as the enabler of national energy security, emphasizing the importance of sustainable production from divested assets to ensure energy security for Nigerians.

In addition to addressing domestic energy challenges, NNPCL is also exploring avenues for sustainable energy investment across Africa.

Kyari revealed the company’s intention to invest in the proposed African Energy Bank, aiming to secure funding for energy projects on the continent and guarantee regional energy security.

The event, attended by prominent stakeholders including government officials and representatives from international organizations, marks a significant step towards reshaping Nigeria’s energy landscape and fostering economic development through improved energy access.

As NNPCL charts its course towards energy abundance, Nigerians remain cautiously optimistic about the prospects of a brighter energy future.

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