Australia Is Paid to Borrow in First Sale at Negative Yields

(Bloomberg) -- Australia just joined Japan, New Zealand and most European nations in selling short-term bills at a negative yield.

An auction of three-month Australian notes on Thursday saw A$1.5 billion sold at an average yield of 0.01%, with buyers who bid most aggressively at the sale receiving a yield of minus 0.01%. The negative yield means that the nation is being paid to borrow from some investors.

Yields in Australia have been close to zero since the central bank cut benchmark rates to 0.1% to help counter the financial and economic impact of the coronavirus pandemic. But Thursday’s development isn’t a sign that investors see the Reserve Bank of Australia steering toward additional rate cuts.

Swap markets pricing suggests that the policy rate will stay on hold until the end of next year and beyond. The negative yield is more a symptom of the large amount of liquidity available to banks since RBA introduced a three-year loan program for lenders.

Known as the Term Funding Facility, it has seen almost A$84 billion in borrowing so far, which has reduced the need for short-term funding from elsewhere.

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