Australian Treasury Notes

Australian Treasury Notes are short-term Australian-dollar securities issued by the Commonwealth of Australia to meet short-term financing needs. They have maturities of less than 12 months, pay no periodic coupon, and are sold at a discount to face value; at maturity, the Commonwealth repays their face value. The AOFM manages their issuance and administration. ^[1][2]

Purpose and place in government borrowing

Treasury Notes are one of the three main types of Australian Government Securities (AGS), alongside Treasury Bonds and Treasury Indexed Bonds. All are issued by the Commonwealth through the Australian Office of Financial Management (AOFM). The AOFM describes Treasury Notes as a short-term instrument for the government’s financing requirements, distinct from longer-term borrowing through bonds. ^[1][3]

Their principal role is cash and liquidity management. Government receipts and payments do not necessarily occur at the same time or in even amounts throughout the year. The AOFM uses Treasury Notes to help manage these within-year fluctuations in financing needs, adjusting issuance as requirements change. The Notes can therefore contribute to funding the government’s cash balance rather than being used only to finance long-term borrowing. ^[4]

This function is different from the role of longer-term securities. Treasury Bonds generally raise longer-term funding and pay coupons; Treasury Notes are short-dated and do not pay coupons. The AOFM has described their issuance as part of its Cash Management Portfolio, which is intended to smooth peaks and troughs in the government’s cash cycle. ^[4]

Structure and return

A Treasury Note is a discount security. An investor pays less than the Note’s face value when acquiring it and receives the full face value at maturity. The difference between the purchase price and the repayment amount represents the investor’s return before fees and any applicable tax. Unlike a coupon-paying bond, a Treasury Note does not make scheduled interest payments during its term. ^[2][4]

The Note’s price is linked to its yield to maturity and the time remaining until repayment. AOFM market information states that Notes are quoted and traded on a yield-to-maturity basis. Its published pricing formula calculates the price per A$100 of face value as **P = 100 / [1 + (f / 365) × i]**, where *f* is the number of days from settlement to maturity and *i* is the annual yield expressed as a decimal. Thus, for a given yield, the time to maturity is part of the price calculation. ^[1]

Because the security is redeemed at a specified face value, its yield and market price move inversely: all else equal, a higher yield corresponds to a lower purchase price, and a lower yield corresponds to a higher price. If an investor sells before maturity, the sale price may differ from the original purchase price and from the amount due at maturity. Holding to maturity avoids the need to sell at an interim market price, but does not remove other risks such as the possibility that inflation reduces the purchasing power of the repayment. The price formula and redemption terms are specified by the AOFM. ^[1][2]

Maturity and issuance pattern

Treasury Notes have terms of less than 12 months. The AOFM has described typical maturities as commonly ranging from around three to six months, although Notes may have terms extending up to 12 months. Actual maturity dates depend on the securities offered and the government’s financing requirements. ^[1][4]

The volume issued and outstanding can vary over time. The AOFM’s November 2026 investor update reported that issuance had increased in 2026–27 and that Note volumes outstanding were expected to remain higher over the following few years than levels generally observed since 2021. It also reported that average outstanding volumes had risen from approximately A$30 billion in 2024–25 to around A$39 billion in 2025–26. These are period-specific figures and should not be treated as fixed characteristics of the instrument. ^[4]

Issuance has responded to changes in government financing conditions. The AOFM noted that outstanding Notes rose sharply following the fiscal response to the COVID-19 pandemic, reaching around A$80 billion in 2020, before declining over subsequent years. More recently, the agency has described Notes as playing a larger role in managing within-year financing variations. ^[4]

How Notes are issued

The AOFM conducts Treasury Note tenders in the primary market. AGS, including Notes, are issued through competitive tender into the wholesale market. AOFM program notices announce planned transactions, including offered maturities, amounts, tender dates and settlement dates. The frequency and size of tenders may vary; for example, the AOFM’s 2026–27 program guidance said it planned to conduct a Treasury Note tender most weeks, while noting that the amount outstanding would vary with government cash requirements. ^[3][5]

Participation in tenders is conducted through registered bidders and specified market systems, according to the AOFM’s transaction notices and relevant issuance documentation. The AOFM identifies Notes as securities managed and administered by the agency on behalf of the Commonwealth. In the Information Memorandum opened for this entry, the AOFM states that Notes may be issued by tender or another appropriate method and describes their expected lodging and trading through the Austraclear system. Investors and intermediaries should refer to the applicable, current issuance documents for operative terms, since an information memorandum may be updated. ^[2][6]

Trading and investors

Treasury Notes are wholesale securities. The AOFM describes the primary issuance market for AGS as wholesale, and reports that government securities also trade in domestic and international secondary markets on trading platforms. Notes may consequently change hands after their original issue, though secondary prices reflect market yields and the remaining time to maturity. ^[3]

The AOFM’s 2019 overview characterized the Treasury Note market as primarily a buy-and-hold market, with lower secondary turnover than Treasury Bonds. It also described the Notes as instruments used by investors seeking short-term exposure to Australian government debt. These observations describe market characteristics in that publication and are not a guarantee of liquidity for any particular Note or transaction. ^[6]

Treasury Notes are obligations of the Commonwealth. The AOFM’s Information Memorandum identifies the Commonwealth as issuer and sets out the statutory basis and payment arrangements for the securities. As with other debt securities, their value and practical risks should be distinguished from a bank deposit: a Note is a marketable government security, and its price can change if sold before maturity. ^[2]

Differences from related securities

Treasury Notes differ from Treasury Bonds chiefly in term and payment structure. Notes mature in under 12 months and are issued at a discount without coupon payments. Treasury Bonds are longer-term securities with periodic interest payments. Treasury Indexed Bonds have capital values adjusted for movements in the Consumer Price Index and pay interest on the adjusted capital value. ^[1][3][7]

They also differ from bank bills and term deposits. A Treasury Note is a debt obligation of the Commonwealth and trades as a security; a bank bill is a short-term money-market instrument associated with a bank or other issuer, while a term deposit is a deposit product offered by a financial institution. Their issuers, legal structures, access arrangements and market pricing are not interchangeable. ^[2][3]

Tax and investor access

The AOFM states that Australian Government Securities are exempt from non-resident interest withholding tax. This statement concerns that particular withholding tax and should not be read as a complete account of tax treatment for every investor or jurisdiction. Tax outcomes can depend on an investor’s residency, circumstances and the way a gain or return is treated under applicable tax rules. ^[3]

The AOFM’s retail-investor information notes that a former Reserve Bank facility for retail investors to purchase certain Australian Government Securities directly from the government closed on 21 May 2013. Accordingly, the historic direct-purchase channel described on that page is not a current way to buy securities from the government. Access to a Treasury Note through a market intermediary, where available, is distinct from direct retail issuance. ^[8]

Role in the Australian financial system

Treasury Notes connect the Commonwealth’s day-to-day cash-management needs with the wholesale money market. Their short maturity allows the AOFM to adjust issuance more flexibly than would be possible if it relied solely on long-term borrowing to manage temporary financing variations. The AOFM has also explained that Treasury Note issuance can be adjusted relatively quickly as government financing requirements change. ^[4]

The instrument’s central features are therefore its Commonwealth issuer, short maturity, discount pricing and redemption at face value. The amount outstanding, tender calendar and available maturities are program decisions that can change with cash requirements. The AOFM’s current notices and security information provide the relevant reference for those changing details. ^[1][5]