SYDNEY, Dec 7 (Reuters) - The funding agency for Australia's state of Victoria said it plans to extend its yield curve with a new benchmark line to lock in attractive terms, joining the federal government and the state of Queensland.
Bill Whitford, Treasury Corporation of Victoria's (TCV) managing director, told Reuters the agency was considering an Australian dollar bond with a maturity likely to be between 13 and 15 years, with the sale pencilled in for the second half of next year or later.
"Our immediate focus is to build our A$1.4 billion 2028 bond before opening a new line," he said, adding TCV's strategy was to start with a modest issue and rapidly increase it to a liquid size typically between A$2 billion to A$4 billion.
Whitford said there were no current plans to issue foreign currency bonds because it was far cheaper to raise Australian dollars, estimating "double-digit basis points" in cost savings.
The attractive terms found locally are largely due to ongoing demand from local banks which hold around half of TCV's bonds to meet Basel liquidity requirements in case of a financial crisis.
The state's average funding requirements for the next five years are modest at around A$3 billion per year, Whitford said, largely due to the proceeds of asset privatisations.
Earlier this year Victoria sold the Port of Melbourne, Australia's busiest port, to a consortium for A$9.3 billion. sell-off was part of a A$100 billion-plus privatisation programme nationally, in which states and the federal government are trying to cut debt and fund new capital works by selling existing infrastructure assets.
With A$34 billion of debt outstanding, TCV is the third largest state borrower after Queensland and New South Wales.
Whitford downplayed the likely fallout from any downgrade to its pristine triple-A rating.
Standard and Poor's in July cut the outlook for Australia's credit rating to negative from stable, threatening a downgrade of its AAA status.
"There are so few triple A rated countries left in the world that it would not impact our access to the market," he said.
Australia is one of only a dozen countries still rated triple-A by S&P and Moody's.
Underpinning TCV's debt is solid appetite from international investors, led by Asia and Europe, who hold a fifth of the state's bonds.