September 2035 Government inflation-linked tender #602; coverage ratio highest for year at 4.7 times; weighted average yield virtually unchanged at 2.15%

The results from the latest inflation-indexed bond offer by the Treasury's Debt Management Office have been released. The details are shown below.

2.50% - 20 September 2035 Today
#602
Previous
#599
Previous #594 Previous #590 Previous #587   1 Year Ago #567
Series offered tender
May 12,
2017
tender Apr. 13, 2017

tender Feb. 10, 2017

tender Dec. 9, 2016 tender Nov. 11, 2016
 
tender Apr. 14, 2016
Total Amount Offered ($mln) 100 100 100 100 100   100
Total Amount Allocated ($mln) 100 100 100 100 100   100
Total Number of Bids Received 49 40 42 50 53   43
Total Amount of Bids Received ($mln) 471 234 451 538 456   293
Total Number of Successful Bids 7 20 11 14 14   5
Highest Yield Accepted (%) 2.1600 2.1550 2.4200 2.4300 2.2600   2.1400
Lowest Yield Accepted (%) 2.1250 2.1150 2.3950 2.4150 2.2350   2.1400
Highest Yield Rejected (%) 2.2700 2.2600 2.5500 2.5750 2.3800   2.3200
Lowest Yield Rejected (%) 2.1600 2.1550 2.4200 2.4300 2.2600   2.1400
Weighted Average Accepted Yield (%) 2.1485 2.1426 2.4110 2.4238 2.2498   2.1400
Weighted Average Rejected Yield (%) 2.1905 2.1967 2.4501 2.4694 2.3065   2.1902
Amount Allotted at Highest Accepted Yield as Percentage of Amount Bid at that Yield* 71.4 75.0 37.5 51.2 95.0   66.7
Coverage Ratio 4.71 2.34 4.51 5.38 4.56   2.93

*Individual allotments may vary due to rounding.

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2 Comments

A pathetic yield, but that's the good news. Good luck with ever seeing your principle back again. Govt debt defaults are a virtual guarantee in 15-20yrs from now.

Completely disagree. A govt debt default in that timeframe is a very low chance. Especially as we are going into a period of increasing surpluses and increasing resilience. But would be interested in your evidence as to why that will be true "in 15-20 yrs".

If we go back 20 years - to 1996 - gross Government debt was a bit over 32% of GDP, and they were paying 17.15% interest on it. 

Now, 20 years later, and after the run up to keep thing stable during the GFC, gross Government debt is ... a bit over 32% of GDP. In 2016 the average cost to the Government of servicing this debt was 2.26%. On this basis, it is completely sustainable.

Sure, other countries who have Govt dept:GDP ratios of 100% or more (especially in Europe) face stress issues if economies go to custard. But that is not New Zealand.

(And things are better that the stats above. They are based on gross Government debt. And that includes debt owed to itself, like the ACC, EQC, RBNZ. Inter agency debt like that is not real external debt. A book-keeping entry could wipe it out. Net Government debt is about $12 bln less.)