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Latest government tender of inflation indexed bond heavily oversubscribed

Posted in Bonds February 8, 2013 - 08:25am, Craig Simpson

The New Zealand Debt Management Office (NZDMO) auctioned $200 million 20 September 2025 inflation-indexed New Zealand Government bonds yesterday with a successful weighted average yield of 1.5014%.

Inflation is currently running at 0.95% which would mean a nominal yield of 2.45%.

By comparison the yield on 10-year NZ government stock which is not inflation adjusted is 3.75% p.a.

With only $200 million on offer at the latest auction there was serious demand for the bonds. This was reflected in the bid-cover ratio of 6.5 times. 

In October 2012 the NZDMO issued $2.5 billion of the 2% coupon bonds at a real yield of 1.96%. That was the government's first foray back into the inflation indexed bond market since 1999.

The previous auction was also heavily oversubscribed.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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2 Comments

by Chester | 08 Feb 13, 8:42am

Just a note on inflation that

Just a note on inflation that I havent seen mentioned anywhere yet. As of April 1st there will be a decrease in take home pay of 3% for a lot of New Zealanders (2% student loans and 1% in kiwisaver).

by starfish1 | 08 Feb 13, 9:51am

Bond Bubble . Link

Bond Bubble . Link below.
 
http://www.bloomberg.com/news/2013-02-07/u-s-30-year-bond-losses-pass-5-as-fed-price-gauge-rises.html