New Australian Bonds Leave A ‘Wonderful’ Legacy for Your Grandchildren

More ‘wonderful’ news for the Australian economy.

As the Australian Office of Financial Management (AOFM) reveals:

Subject to market conditions, a new 21 March 2047 Treasury Bond is planned to be issued via syndication in the week beginning 10 October 2016.

ANZ, Citi, Commonwealth Bank of Australia, Deutsche Bank AG, UBS AG Australia Branch and Westpac Institutional Bank will act as Joint-Lead Managers for the issue.

What this means is that, this week, Australia will launch its first ever 30-year bond.

The old refrain about governments going into debt is that it puts a burden on this generation’s children. Well, that saying now needs an update.

Now the government’s debt will officially put a burden on this generation’s grandchildren.

But aside from that, check out the banks involved in helping the AOFM — and by extension, the government — issue these new long bonds. Is it any wonder that the banks are quick to urge governments to go into debt?

The more governments go into debt, the more they need to issue bonds, and the more the big banks can charge in commissions for dealing in the bonds.

Not only that, of course, but the banks then typically encourage governments to ‘invest’ the bond proceeds into infrastructure. No prizes for guessing who gets the money. That’s right, the biggest Aussie construction companies.

Why should that help the banks? In two ways. First, the big construction companies are the banks’ customers. Secondly, the big banks control more than 80% of the Aussie funds management industry, which derives fee income from the money that flows into the superannuation industry.

The more revenue notched up by the building firms, the bigger their profits, and the higher their share prices…and the bigger the fee income earned by the banks and their funds management firms.


Kris Sayce,
Publisher, Money Morning

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