By Ian Chua
SYDNEY, March 22 (Reuters) - With global interest rates at record lows as major central banks try to stimulate their sluggish economies, analaysts say there has never been a better time for Australia to sell 30-year bonds to secure long-term funds for ambitious infrastructure projects.
Australia's longest-dated bond now is its 2039 issue, launched a few months ago as the government has been slowly extending its maturity curve, and the next point looks like being 30 years, something investors said they would welcome.
Fund manager BlackRock, which has $4.6 trillion worth of assets under management globally, told Reuters such a bond would be well received.
"We would almost inevitably purchase such an issue," said Sydney-based Stephen Miller, a managing director at BackRock.
"With rates at historic lows... it makes perfect sense from an issuer point of view and there will be demand for it from the fund management community, not only locally but from offshore."
Despite Australia's developed capital markets and financial system, its sovereign bond market is relatively small. It almost disappeared when the government ran a string of budget surpluses in the 2000s and eliminated government debt in net terms.
The global financial crisis changed all that, and with public coffers under pressure as a once-in-a-lifetime mining investment boom fades, the government needs to issue more debt.
By the end of this fiscal year ending June, Treasury bonds on issue are expected to have swelled to A$430 billion ($328 billion), from just A$47-49 billion back in 2004-2008.
Fortunately, huge monetary stimulus from the European Central Bank to Bank of Japan have driven global bond yields to record lows, meaning global investors are on a relentless search for yield, making Australian yields attractive.
The U.S. Federal Reserve's comments last week that it would halve the pace of its planned interest rate rises this year means low interest rates will remain for some time yet.
Australia's top triple-A credit rating and attractive yields have been a major draw, particularly for foreign investors who now hold just under two-thirds of outstanding bonds.
Australia's 2039 bond 0#AUTSY= already offers a relatively plump yield of 3.2 percent, compared with less than 1 percent for 30-year bonds in Germany DE30YT=RR and Japan JP30YT=RR .
It also stacks up well against the U.S. 30-year bond US30YT=RR , which yields 2.7 percent.
Orders for the 2039 issue were roughly double the A$4 billion offered.
The concept of a 30-year bond is not new. Former Treasurer Joe Hockey talked about it when he was in opposition in 2012, saying long-dated bonds would help create an annuity market and boost the corporate bond market.
Treasurer Scott Morrison on Friday declined to confirm if the government would issue such a bond, but said he was keeping his options open in a "very constrained fiscal environment."
Malcolm Turnbull, who declared he would be an infrastructure Prime Minister, last month released an ambitious national blueprint that includes recommendations for reform in the energy sector, telecommunications, transport, water, among others. All of which needs funding.
More will be revealed in the federal budget slated for May 3 but there is unlikely to be any issue until after the country holds an election some time over the next few months.
($1 = A$1.3094)