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Government debt manager to issue $4 billion 30-year bond after attracting massive interest

Bonds / news
Government debt manager to issue $4 billion 30-year bond after attracting massive interest
New Zealand dollars floating

New Zealand Debt Management (NZDM), the Treasury unit that oversees government borrowing, says bids for a new 30-year government bond issue topped $19.1 billion, a record high.

That tops the prior record, when more than $18 billion chased a seven-and-a-half year government bond in 2020. The only previous 30-year government bond attracted more than $12 billion of investor interest when it was issued in 2021.

"The Treasury has today announced that NZ$4.0 billion of the nominal 15 May 2054 New Zealand Government Bond has been issued via syndication," Treasury said today (Wednesday).

"The bonds, which carry a coupon of 5.00%, were issued at a spread of 1 basis point over the 15 May 2051 nominal bond, at a yield to maturity of 5.0925%. Total book size, at final price guidance, exceeded NZ$19.1 billion."

Settlement of the issue takes place on February 28, with no further issuance of the new bond before May 2024. Thirty year bonds are the longest term on offer from NZDM.

*Hear more about how NZDM operates in this episode of our Of Interest Podcast; New Zealand Debt Management's Kim Martin on how the Government borrows and repays debt.

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9 Comments

It will only take the PAYE of 11547 taxpayers earning 80k per year to cover the annual interest.

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So for every 11547 immigrants we can get $4 billion of new debt. Sweet...

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I believe they only need to earn $29.66 per hour to get the rubber stamp work visa. So assuming they work 40 hrs a week (they probably work 60 hours and only get paid for 40) we will need 17350 of those  paying PAYE to cover the yearly interest on 4 Billion. That's assuming they don't need any subsidised healthcare or assistance with accommodation ect.

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This sale will increase the overall interest rate Treasury pays on its bonds from 2.46% to 2.58%. However, it will also reduce the interest the Crown pays on settlement account balances by $385,000 per week. 

 

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Only until the government dispenses from the Crown Settlement Account the same amount to eligible beneficiary bank accounts. Or when the $13.95B 0.5% 15/05/2024 issue is redeemed by Treasury and extinguishs that amount of previously created outstanding bank credit.

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I presumed on the first point you mean... when Govt instruct RBNZ to debit the CSA and credit a bank account outside the settlement system, which will lead to the settlement balance of a commercial bank going back up?

Its all a bit chicken and egg isn't it? What comedy first the bond sale or the spend etc.

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In the case of COVID the emergency spending came first.

We provide a Crown overdraft facility to help the Government manage short-term fluctuations in its cash flows. We temporarily increased the overdraft from $5bn to $10bn for a three month period to 1 July, to assist with the potential for some larger-than-usual changes in cash flows. The overdraft facility was utilised for a short period coinciding with the Government’s April 2020 bond maturity, and the account has since been replenished following the issuance of additional bonds and Treasury bills. Link

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Coupon rate 5%. In two years and rates are say 1% less ... gets out calculator ... Nice. Easy money.

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exactly - not surprising there was high demand.

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