A sizeable share of this demand comes from official reserve managers who are attracted to the relatively higher yield on Australian government bonds, the high and stable credit rating of the Australian government and Australia’s strong and stable economic performance. Nonresidents’ holdings of semis have continued to decrease, while the semis holdings of Australian banks have continued to increase.
This reflects the demand for semis from the Australian banks, given that these securities qualify as high quality liquid assets under APRA’s rules, and offer a (small) yield pick-up over the other high quality liquid assets in Australia, CGS. The share of holdings of financial bonds by non-residents remains below the pre-crisis level as the Australian banks have reduced their funding sourced from offshore.