Westpac: ACGB Offshore Ownership % Lowest In Over 15 Years

Westpac note that "last week's Balance of Payments allows us to get an update on a key cohort in the ACGB demand structure - the offshore investor. In Q220 non-resident holdings of ACGBs as a % of bonds outstanding (repo adjusted) fell to 53% which is the lowest level since the GFC. Without adjustment, the offshore ownership fell to just 47% which is the lowest non-resident ownership share in over 15 years. This statistic on its own could present a challenging story for ACGB demand, however unlike the March quarter, this decrease does not owe to offshore owners selling ACGBs. In fact, net purchases were the largest they have been in the series' almost 20-year history. So offshore investors are still buying ACGB but not at a pace that matches the historic levels of supply. Our flow data confirms that offshore interest waned towards the middle of the year but has picked up in the last month or so. Our interpretation is that this is a reliable investor cohort for now, with the repo-based demand an indication that both real money and speculative investors are still viewing Australia's high relative yields in a positive light."