Issuance of government bonds reached its peak for the current cycle during the 2011/12 financial year, according to the Australian Office of Financial Management.The AOFM, which released its annual report yesterday, said that the Government's intention to return the Budget to surplus in 2012/13 meant that issuance was likely to decline in the current year.The AOFM is responsible for the management of Australian government debt. Treasury bond issuance in the 2011/12 financial year was A$58 billionThe AOFM said that the "ongoing entry of new investors to the market and the prevailing conditions of strong demand underpinned a successful issuance program."Outstanding stock at June 30 was $205 billion, with 18 bond lines.Four new bond lines were launched during the year: an October 2015 maturity, a July 2017 maturity, and April 2024 and April 2027 bond lines. The April 2027 maturity extends the yield curve to around 15 years.In recent years the AOFM has been gradually lengthening the average term of its issuance, a trend it said was likely to continue in 2012/13. Over the past two years, average terms have increased from six year to 7.5 years.The report said: "With volatility and uncertainty continuing to be prominent features of global financial markets, the AOFM views such a strategy as providing the best fit with its core debt management objectives."Index bonds worth $2.14 billion were issued in 2011/12 and the value of outstanding stock rose to $16.07 billion.The average rate paid on government debt was 5.07 per cent - down from 5.22 per cent the previous year.In 2011/12 the AOFM invested $1.93 billion in 11 residential mortgage-backed securities transactions, from eight issuers. Since the start of the RMBS support program, in 2008, AOFM has invested $15.3 billion in 60 transactions from 20 issuers. Repayments total $4.1 billion.Interest income on RMBS holdings was $637 million - an annual return of 5.8 per cent. This compares favourably with the AOFM's funding costs.