NAB Highlight International Demand In Recent Months

NAB note that "offshore investors have been an important source of demand for Australian government related securities over the past year as funding needs increased. Japanese demand has been especially notable, with cumulative net buying of ACGBs and Semis between March and November of more than A$45bn. In the Semi market, offshore investors purchased A$17bn of the net A$76bn in supply that came to market in the twelve months up to Q320. FX hedged yields are a key driver of offshore demand for AUD bonds and these have now been fairly steady relative to most key offshore benchmarks for many months. We're expecting a little ACGB underperformance to USTs in the first half of 2021, and the steeper curve should keep the hedged yield advantage for AUD securities steady or slightly wider than it has been. Japanese flows may be more variable, especially if the AUD/JPY begins rising again."