Long-term debt securities
Definition
15.104 Long-term debt securities include those securities that have an original maturity of more than one year. Each consists of a document that represents the issuer's pledge to pay the holder the sum of money shown on the face of the document, on a date which at the time of issue is more than one year in the future. Many bonds on issue in Australia pay interest at a set percentage of face value every six months (known as ''coupon interest'') for the life of the bond. Such bonds are known as fixed interest bonds. There is a significant amount of variable rate bonds, and some deep discount (or zero coupon) bonds on issue.
15.105 Long-term debt securities are frequently borrowed by market makers to cover short positions. Where identified, stock loans of this nature are treated in the ASNA as securities' trades. Repurchase agreements, which are also used to cover short positions, are treated as purchases and sales of debt securities.
15.106 Asset-backed securities are arrangements under which payments of interest and principal are backed by payments on specified assets or income streams. They may be issued by a specific holding unit or vehicle, for the purpose of raising funds in order to pay the originator for the underlying assets. Asset-backed securities are classified as debt securities because the security issuers have a requirement to make payments, while the holders do not have a residual claim on the underlying assets. They are backed by various types of financial assets; for example, mortgages and credit card loans.
15.107 Non-participating preferred stocks or shares are those that pay a fixed income but do not provide for participation in the distribution of the residual value of an incorporated enterprise on dissolution. These shares are classified as debt securities. Bonds that are convertible into equity are classified in this category prior to the time that they are converted.
15.108 Long-term debt securities issued in Australia include:
- Treasury bonds issued by the Commonwealth Government;
- Various series of inscribed stock which are issued by the central borrowing authorities and other government-owned corporations. These are known as semi-government securities;
- Debentures, transferable certificates of deposit, and unsecured notes, which are collectively called corporate securities or medium-term notes;
- Asset-backed bonds including mortgage-backed bonds;
- Covered bonds, issued by authorised deposit taking institutions;
- Kangaroo bonds, which are foreign bonds issued in the Australian market,
- Convertible notes prior to conversion; and
- Renewable energy certificates (RECs) issued by the Commonwealth Government.
15.109 The data are further classified by 'domicility'; that is, the market into which the issue was made, being in Australia (onshore) or offshore.
15.110 The table below outlines the data sources and methods used in the estimation of quarterly long-term debt securities, i.e. bonds in current prices. The estimates are valued at market prices. Real estimates are calculated for the national balance sheet.
| Item | Comment |
|---|---|
| Bonds issued by domestic sector and subsector | |
| Data for bonds issued are sourced from APRA's Economic and Financial Statistics (EFS) Debt Securities Issued forms completed by authorised deposit taking institutions, Registered Financial Corporations (RFCs) and general insurers; and the suite of balance sheet forms from the ABS Survey of Financial Information. Supplementary data sources include ABS Government Finance Statistics; the Reserve Bank of Australia (RBA); the Australian Office of Financial Management; and Bloomberg. | |
| Holdings of bonds by issuing sector and subsector | |
| The counterparty assets holders for bonds are obtained from the suite of balance sheet forms from the ABS Survey of Financial Information; returns under APRA's Economic and Financial Statistics (EFS) collection; returns under APRA's EFS Repurchase Agreements and Securities Lending and Debt Securities Held forms; the RBA Repurchase Agreement Schedule; and the ABS Survey of International Investment. A repurchase agreement (repo) involves the sale of securities or other assets with a commitment to repurchase equivalent assets at a specified date. The buyer may on-sell these securities to another party. The APRA and SFI repo data is assembled into sectoral supply and demand matrices for both national general government securities and state central borrowing authorities' securities. The basis for making repo adjustments is that the instruction for APRA's EFS Statement of Financial Position explicitly requires the reporting entity to include all securities lent or sold under repo in its investment and trading securities and exclude all securities borrowed or purchased under repo. In order to adjust securities holdings onto a securities trade basis, repo is subtracted from and the reverse repo is added back to the reported securities holding of ADIs and registered financial corporations. The APRA repo schedules are substituted with information on securities under repurchase and securities lending agreements by banks with the RBA, collected on the ABS Survey of Financial Information form. The total reported holdings of bonds are adjusted to align with the reported issuance of bonds. A residual asset holding of bonds is calculated as total bonds issuance less the sum of total assets held (from the ABS and APRA forms). The residual is allocated to the household sector, but other sectors may be adjusted due to reporting errors, incorrect classifications, under-coverage or conflicting data sources. | |
| Transactions and price change | |
| For each issuing sector, price changes are derived using specific market bond indexes to enable the derivation of transactions when not directly available from source data. | |
| Rest of the world | |
| The main data source for bonds issued by the rest of the world and the respective counterparty asset holders are obtained from the ABS Survey of International Investment. For rest of the world issuance and rest of the world asset holdings price changes are derived using specific market bond indexes to enable the derivation of transactions when not directly available from source data. | |