Transcript: Interview with Australian Office of Financial Management’s Anna Hughes on 22 January
22 January 2026
By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on January 22 with Anna Hughes, CEO of the Australian Office of Financial Management.
Q: We have seen a notable sell-off in Australian sovereign bonds in recent weeks and months. How do you interpret these market moves?
A: Australian sovereign bond yields are influenced by both global and domestic factors. Movements in long-term yields have broadly reflected changes in expectations for central bank policy rates, both in Australia and internationally. In recent months, market expectations for the RBA cash rate have shifted from anticipating rate cuts to pricing in a potential rate increase. This contrasts with some other sovereign markets, such as the United States, where expectations are tilted toward further rate cuts.
Q: How are current market conditions influencing the timing and sizing of the two expected syndications for the remainder of this fiscal year? Could these market dynamics delay them within the current window — or potentially into the next fiscal year if conditions were to deteriorate further?
A: We do not expect current market conditions to affect the timing or size of our announced syndications for the remainder of the fiscal year.
Q: To what extent have recent increases in yields and volatility in the Australian government bond market shaped the assumptions underpinning the mid-year economic and fiscal outlook?
A: Net interest expense on AGS represents a relatively small share of both the Budget and the broader economy. Net interest payments are projected to remain low in 2025–26 at around 0.6% of GDP and stay below 1% of GDP across the forward estimates. Changes in yields primarily affect interest costs on newly issued bonds. Consequently, while sustained higher yields would have a long-term impact, there is limited impact on the Budget in the near term.
Q: You lowered the planned Treasury bond issuance for 2025-26 to $125 billion from the previously expected $150 billion. What were the key drivers behind this revision?
A: The 2024–25 Budget outcome was approximately $20 billion better than anticipated at the time of the 2024–25 Budget published in March 2025. In addition, a modest improvement for the current 2025–26 fiscal year was announced in the December 2025 MYEFO. As a result, the AOFM has reduced the planned Treasury bond issuance task for 2025–26 by around $25 billion.
Q: Given the hawkish repricing of RBA rate expectations, how much weight do monetary policy expectations carry in your planning and execution of issuance?
A: The AOFM is a price taker in global bond markets. The size of the funding task means that issuance needs to be executed through the cycle, with the primary focus on meeting the purpose to fund the Government. Issuance windows are selected based on best information at the time, considering market conditions, investor demand, costs and risks. The AOFM and the RBA operate independently in fulfilling their respective mandates.
Q: If volatility persists, would you consider supplementary auctions, buybacks, switches, or other liability-management operations to support market functioning?
A: The AOFM conducts its operations in a manner that supports market functioning and liquidity. This requires transparency and consistency in decision making and for issuance to be attuned to market conditions. We also seek to encourage broad-based participation in the AGS market through our investor outreach and engagement activities. The AOFM has a range of tools for managing periods of stress in markets, including a liquidity buffer. The buffer provides flexibility to reduce the pace of or suspend bond issuance for an extended period of time if necessary. The AGS market continues to function normally, as it has done so throughout fiscal 2025-26 despite periodic bouts of volatility.
Q: How are current market conditions informing decisions on which existing bond lines you choose to reopen?
A: Decisions on reopening existing lines are guided by market feedback as well as our broader debt management strategy.
Q: Across the curve, which maturities are currently attracting the strongest investor interest?
A: There is strong interest across the curve although bond lines comprising the 3- and 10-year futures baskets see the most consistent investor demand.
Q: Recognizing that it is still early, is there any preliminary guidance you can offer on how markets should think about the 2026-27 issuance strategy?
A: The 2026–27 issuance strategy is anticipated to be broadly consistent with recent years. New lines slightly longer than the ten-year futures contract (around 12 years in tenor) are likely to be established while a new 30-year benchmark will also be considered.
Q: Could expectations of further policy rate increases prompt a shift toward greater flexibility in issuance — or an emphasis on shorter tenors to manage cost risk?
A: Market conditions and investor feedback are the primary considerations in determining weekly issuance. The AOFM does not make issuance decisions based on policy rate expectations.
Q: With markets expecting a new 10-year Green Treasury Bond later in the 2025-26 fiscal year, can you provide any indication on anticipated size or issuance parameters?
A: The AOFM plans to issue a new June 2036 Green Treasury Bond in the second half of the 2025–26 fiscal year. We anticipate sizing to be broadly similar to the June 2034 Green Bond.
Q: Are you satisfied with the level of demand for the June 2034 green bond since its 2024 launch, and has this performance encouraged further expansion of the green-labelled program?
A: The June 2034 Green Treasury Bond has performed well since its launch, trading in the secondary market at levels close to the May 2034 Treasury Bond. Investors report good liquidity and pricing, and we have seen a number of new investors buy in the secondary market. The green bond program is a key part of the Australian Government’s sustainable finance strategy, and the AOFM remains committed to supporting and maintaining the program going forward.
Q: Do you expect to maintain regular tender issuance into the June 2034 bond once the new June 2036 green line is introduced?
A: Yes, we expect to conduct regular tenders of both the existing June 2034 and the new June-2036 bond lines to maintain liquidity and investor interest.
Q: Could you provide an update on plans to make exchange-traded Green Treasury Bonds available to retail investors by the end of 2025?
A: A green bond program requires independent assurance that confirms the program’s credibility and alignment with best practice. Green bond assurances are considered ‘financial product advice’. Providers are therefore required to hold an Australian Financial Services License (AFSL). There are currently no assurance providers with the required AFSL. Therefore, Green Treasury Bonds cannot be made accessible to retail investors. The Australian Government Green Bond Framework is anticipated to be reviewed around every two years, with updates requiring a new SPO. The feasibility of eGTBs will be re-assessed at the time of a framework update expected in 2028.
Q: Do you envisage any changes to your inflation-linked (TIB) strategy in the near term?
A: We do not anticipate any changes to our TIB strategy in 2025-26.
Q: In our discussion last year, you mentioned monitoring the TIB market in the context of monthly CPI and considering a shift toward a more internationally consistent formula. Has your thinking evolved on this?
It remains our intention to introduce a new TIB product linked to monthly inflation. At the earliest this will be considered during 2026-27.
Q: How would you characterize your current investor base, and are there particular geographies or investor types you are aiming to increase exposure to?
A: The AGS investor base is deep and diverse. Approximately half of Treasury Bonds on issue are held by offshore investors, which include official institutions such as central banks and sovereign wealth funds, as well as fund managers, pension funds, insurers, offshore banks, and hedge funds. Domestic investors primarily comprise banks, fund managers, and superannuation funds. The overall structure of the AGS investor base has remained relatively stable over the past two to three years. Since AGS trade freely in competitive markets, the AOFM does not target a specific investor composition. However, we do structure our issuance program and investor relations activities to ensure AGS remain appealing to the widest possible range of investors. AOFM’s investor relations activities focus on maintaining strong relationships with existing investors while also engaging with potential new investors as part of our broader outreach.