Australia has joined the world of negative interest rates with investors buying $550 million of federal government debt at minus 0.01 per cent.
The Australian Office of Financial Management (AOFM), which overseas the federal government's debt sales, confirmed on Thursday the move into negative rate territory.
Investors have bought more than $500 million of federal government debt with a negative interest rate.Credit:Louie Douvis
About a third of all government debt globally is currently being sold at negative rates but until today investors in Australian debt expected to get at least a small return on their investment.
The AOFM had offered investors $1.5 billion in Treasury notes to be repaid in March next year.
There were 58 bids in total for the debt worth a combined $8.2 billion with the highest bid 0.07 per cent. The lowest was the minus 0.01 per cent.
The more bids there are, the lower the eventual interest rate on the debt.
The AOFM sold 37 per cent of the debt at the minus 0.01 per cent.
A separate tender for $500 million, to be repaid in July next year, attracted a low bid of 0.01 per cent.
Government bonds indexed to inflation have been sold occasionally at negative rates but this is the first time a Treasury note, where the interest rate is fixed, has been sold at a negative level.
Data released on Thursday by the Parliamentary Budget Office on the nation's long term budget trends noted global interest rates would keep total interest payments low despite historically high levels of debt.
"While government debt is now larger than in 2018-19 as a result of the pandemic and associated policy response, interest rates are historically low, keeping interest payments stable as a share of GDP," it said.
"Low interest rates reflect the recent weakness in economic and price growth and the Reserve Bank of Australia seeking to support the Australian economy.
"Other central banks around the world are also setting interest rates low, in part to stimulate
their economies."
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