Australia's government sold its biggest-ever bond, issuing $9.3 billion of notes maturing in December 2021.

The offering was snapped up by investors even as doubts swirl about the country's top credit rating and the government's ability to rein in its budget deficit. While credit assessors refrained from taking any action following December's mid-year budget update, S&P; Global Ratings has had a negative outlook on the country since July.

The sale follows a recovery in buyer appetite for debt that's brought three-year bond yields down after the selloff in global debt markets took them as high as 2.07 per cent in December. The rate was at 1.97 per cent as of 2:28 p.m. in Sydney.

The new securities were priced to yield 2.24 per cent, the Australian Office of Financial Management said Wednesday. The sale eclipses the $7.6 billion raised by the AOFM's debut 30-year deal in October.

The AOFM is also buying back $655 million of July 2017 bonds and $2.41 billion of January 2018 debt in conjunction with the sale.

The face value of federal government securities is expected to reach $498 billion by the end of June and exceed $600 million in the 2019-20 financial year. The government's net debt is predicted to increase to peak at 19 per cent of economic output in 2018-19 after climbing to 18.1 per cent in the current fiscal year, according to official projections.

The new bond has a coupon of 2 per cent and the transaction was managed by Australia & New Zealand Banking Group, Citigroup, UBS and Westpac.