in australian dollars has been driven by both demand and cost considerations for issuers. on the demand side, it is clear ( although hard data are not available ) that global demand for high - yielding australian - dollar assets has been growing in recent years. an emergent group of international investors, along with the domestic investor base, are interested in purchasing high - quality australian - dollar assets, and, given the relative scarcity of australian government paper this has created a natural opportunity for the ssa issuers. bis central bankers ’ speeches moreover, there has tended to be a cost advantage to issuing in australian dollars, owing in part to the elevated cross - currency basis swap that has encouraged issuance by supras and agencies in australian dollars. equally as important as the cost of hedging is the large amount of foreign issuance by australian entities that ensures access to a deep swap market for ssas funding in australian dollars. apra liquidity announcement i would like to finish with a few remarks on the recent apra announcement on eligible assets for the forthcoming basel liquidity standards. 4 the apra announcement stated that cgs and semis are the only assets that currently qualify as level 1 assets and that there are currently no level 2 assets on issue. this outcome reflected an assessment of the liquidity characteristics of the various asset classes. as outlined in the basel documents, key considerations in determining which assets qualify are assessments of the depth of local trading activity and the performance of assets in stressed market conditions. specifically, the observed performance of assets during the crisis – a period indicative of a situation in which banks would need to rely on the liquidity in these instruments – was taken as evidence of proven liquidity. the statement did not rule out other assets qualifying as liquid assets at a later date, but there will need to be some history to support an assessment that a particular market has genuine liquidity. as is widely understood, in australia, the amount of cgs and semis on issue falls well short of the amount of liquid assets banks will need to hold to meet the liquidity standard. moreover, it would be counterproductive to require banks to hold such a large share of these assets that it would impair the liquidity in these markets. hence, as announced in december, 5 the rba will offer the banks a committed liquidity facility to meet the shortfall. the eligible assets that banks will need to hold to access this facility are those which are currently eligible for repo with the

guy debelle : the australian bond market in 2011 and beyond speech by mr guy debelle, assistant governor of the reserve bank of australia, at the kanganews australian dcm summit, sydney, 15 march 2011. * * * today i will discuss the current structure of the australian bond market and talk about some trends that might influence its evolution in the coming years. i will focus on the bank debt and kangaroo markets, given the theme of this conference. i will also address some of the issues surrounding the implementation of the forthcoming basel liquidity standard. overview to set the scene, relative to the size of the australian economy, the australian bond market is around the average for developed economies ( table 1 ). however, unlike in many countries around the world today, the private debt market is significantly larger than the public market. this reflects the prudent fiscal policy pursued by both sides of politics, at the federal and state level, over an extended period of time ( graph 1 ). bis central bankers ’ speeches graph 1 structure of the australian non - government debt market the non - government debt market in australia consists of four categories of issuers : financial institutions, other corporate issuers, asset - backed issuers and non - resident kangaroo issuers. as can be seen in graph 2, while all four segments of the market have grown over time, the development of the market has not been uniform : financial institutions have for some time had the largest share of issuance ; asset - backed issuance grew rapidly during the early 2000s, but its growth was severely affected by the financial crisis ; corporate issuance has grown steadily over the past two decades ; more recently, strong demand for australian - dollar assets has seen rapid issuance of australian - dollar debt by non - residents. i ’ d like to touch briefly on the main drivers of developments in each of these markets and talk about some of the potential factors affecting future issuance. bis central bankers ’ speeches graph 2 financials over much of the past two decades, demand for credit outpaced the growth in deposits, so that banks accessed wholesale funding markets to support growth in lending. this outcome reflected a number of factors. australia ’ s relatively high level of investment, and the sustained growth momentum of the economy over the past two decades, underpinned the demand for credit. while the source of the demand for credit shifted between household and business sectors, from the early 1990s recovery until the financial crisis, aggregate credit growth was sustained at a rate of