Description of Graphs for Speech by Ric Battellino, Assistant Governor (Financial Markets)
‘Why do so Many Australian Borrowers Issue Bonds Offshore?’
26 November 2002
Graph 1: Domestic Bonds Outstanding
The graph shows two lines over the period 1995 to 2002: total government bonds outstanding (issued by Commonwealth and State governments); and domestic non-government bonds outstanding (which excludes issues made in Australia by non-residents).
After holding steady over 1995 to 1997, government bonds outstanding have steadily declined falling from around $140 billion to $107 billion. Domestic non-government bonds have risen from $20 billion in 1995 to around $100 billion in November 2002. Most of the growth in domestic non-government bonds outstanding has come since 1999.
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Graph 2: Australian Bonds Outstanding
The graph shows two lines over the period 1990 to 2002: domestic non-government bonds outstanding (which excludes issues made in Australia by non-residents); denoted ‘onshore’ bonds, and offshore non-government bonds outstanding.
From a level of around $13 billion in 1990, onshore bonds rose to around $25 billion in 1992 then fell back slightly between 1994 and 1996. Since 1996 onshore outstandings have grown strongly rising from around $20 billion to around $100 billion.
Offshore bonds have been consistently higher than onshore bonds. Starting at around $50 billion in 1990, offshore bonds have steadily risen to reach more than $180 billion in November 2002.
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Graph 3: Offshore Non-Government Bonds Outstanding
This graph shows offshore non-government bonds over the period 1985 to 2002 broken down by type of issuer: financial companies; non-financial companies; and asset-backed vehicles.
Financial companies account for most offshore bond issuance – financials' offshore bonds have risen from $30 billion in 1990 to $80 billion in 2002. Non-financials now account for $38 billion of offshore bonds, up from $17 billion in 1990. From very low levels prior to 1995 asset-backed issuance has grown to $47 billion.
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Graph 4: Non-Government Bonds Outstanding
This graph is made up of three panels, with separate panels showing data for: financial companies; non-financial companies; and asset-backed vehicles. Each panel contains two lines showing each issuer group's domestic bonds outstanding and offshore bonds outstanding between 1985 and 2002.
Financial companies' domestic bonds outstanding have risen from $8 billion in 1995 to $27 billion in September 2002. Financial companies’ offshore bonds outstanding have risen from $30 billion in 1990 to $88 billion in September 2002. The rise in both series has not been smooth with domestic bonds outstanding falling between 1992 and 1997 and offshore bonds falling between 1990 and 1992.
In 1990 non-financial companies’ domestic bonds outstanding stood at $5 billion, while offshore bonds amounted to $1 billion. By September 2002, domestic bonds were $28 billion while offshore bonds were $40 billion. Most of the growth in domestic bonds outstanding has occurred since 1999.
Domestic asset-backed bonds stood at $5 billion in 1990 and have risen to $46 billion in September 2002. Offshore asset-backed bonds outstanding was minimal in the first half of the 1990s, in the second half of the 1990s it grew rapidly to reach $47 billion currently.
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Graph 5: Australian Bond Issuance 2001 - 2002
This graph breaks down: non-government domestic; non-government offshore; and Commonwealth government issuance by maturity.
27 per cent, 36 per cent, 33 per cent and 3 per cent of non-government domestic issues carried maturities between 1 and 3 years, between 4 and 6 years, between 7 and 10 years and longer than 10 years respectively.
38 per cent, 24 per cent, 30 per cent and 8 per cent of non-government offshore issues carried maturities between 1 and 3 years, between 4 and 6 years, between 7 and 10 years and longer than 10 years respectively.
No Commonwealth government bonds were issued with maturities less than ten years. 11 per cent was issued with a maturity between 7 and 10 years, while 89 per cent carried a maturity longer than 10 years.
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Graph 6: Quarterly Average Issue Size
This graph shows two series: issue size of domestic bonds; and issue size of offshore bonds, for each year between 1998 and 2002.
Up until 2000 offshore bonds clearly had a higher average issue size than domestic bonds. Offshore bonds' average issue size ranged from the current low of about $160 million to a peak of just under $500 million (seen in 2000).
The size of domestic bond issues averaged around $200 million between 1999 and 2002, and has steadily increased over this time period too. The highest average, of around $230 million, was seen in 2002.
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Graph 7: Weighted Average Credit Rating
This graph is made up of three panels, with separate panels showing data for: financial companies; non-financial companies; and asset-backed vehicles. Each panel contains two lines showing the average credit rating of domestic and offshore bonds between 1997 and 2002.
Domestic financial bonds' average credit rating has ranged between AA- and AA. Offshore financial bonds' average rating has ranged between A+ and AA-.
Non-financial domestic bonds' ratings have fallen steadily from AA to just above A. From 1998 the domestic non-financial bonds' average rating is also shown allocating the credit rating of credit-wrapped issues to the underlying issuer rather than the bond issue. This shows a steeper decline in average credit rating, dropping from A+ at the start of 2000 to halfway between A and A- in 2002. The average rating on offshore non-financial bonds has risen from below A- in 1997 to halfway between A and A- in 2002.
Offshore asset-backed issues have carried an average rating of AAA for the full period between 1997 and 2002. The average credit rating of domestic asset-backed issues has fluctuated around a level just a little below AAA.
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Graph 8: Denomination of Offshore Bonds Outstanding
This graph shows offshore non-government bonds between 1985 and 2002 broken down by currency: Australian dollar; US dollar; and other.
Most bonds are now issued in US dollars, with $118 billion US dollar bonds outstanding in 2002, up from $18 billion in 1990. After fluctuating at between $9 billion and $15 billion between 1988 and 1997, the value of bonds denominated in other currencies has grown to $50 billion. The value of Australian dollar bonds outstanding has held relatively steady at around $12 billion.
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Graph 9: Denomination of Offshore Bonds Outstanding
This graph is made up of three panels, with separate panels showing data for: financial companies; non-financial companies; and asset-backed vehicles. Each panel shows a breakdown of bonds outstanding by currency: Australian dollar; US dollar; and other, between 1985 and 2002.
The amount of financials' bonds denominated in Australian dollars rose between 1987 and 1997, peaking at around $20 billion, and has declined since then to $10 billion. Financials' bonds denominated in US dollars has steadily increased rising from $7 billion in 1988 to $40 billion in 2002. Financials' bonds denominated in other currencies rose to $9 billion in 1991, then fell away to $5 billion in 1994 but have increased since then to $36 billion in 2002.
Only a small proportion of non-financial bonds are denominated in Australian dollars, with the value of Australian dollar denominated bonds peaking at $3 billion. The value of bonds denominated in other currencies averaged around $5 billion between 1988 and 1999, but has risen since then to $12 billion. After standing at around $8 billion between 1988 and 1991, US dollar denominated bonds rose sharply in 1993 and 1994, their level has risen at a more modest pace since then to stand at around $30 billion in 2002.
Almost all asset-backed bonds are denominated in US dollars. Offshore asset-backed bonds outstanding was minimal in the first half of the 1990s, in the second half of the 1990s it grew rapidly to reach $47 billion currently.
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