Challenges of Communication. AOFM Tender Doesn't Sell Fully

By Sophia Rodrigues

Challenges of communication!

This morning a 3-mo Aussie T-note auction received lukewarm response --A$936m worth of bids for A$1.0b that was on offer. As a result A$64m was unsold. Another auction for A$500m 6-mo notes was oversubscribed and sold fully. It is the first time since 2000 (based on available data) notes were not fully sold (except tiny 1-2m). In case of bonds the only occasion since at least 1982 when it was not fully sold was 1994 when there was a shortfall of A$303m. Given such an admirable track record, it is no surprise that the AOFM was baffled this morning to see undersubscription for the 3-mo notes. A shortfall of A$64m is a fairly small amount but there was always a worry that some might interpret it as a default by the government because they didn’t get the intended amount from the tender. To quell those worries, the AOFM decided to be pre-emptive and add a line to the release to say the “result is in no way a default by the Commonwealth of Australia.” To me it seemed like an unnecessary addition, some thought it was stupid but how is AOFM to know what reaction this rare event will get. The AOFM appears to have taken a path of least regret. It could have backfired but hopefully it didn’t. Just goes to prove how challenging communication is!