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September 2035 Government inflation-linked tender #584; yield climbs to 1.9% (1.67% previously); Westpac sees inflation as having bottomed and calculated breakeven point for this maturity attractive

Bonds
September 2035 Government inflation-linked tender #584; yield climbs to 1.9% (1.67% previously); Westpac sees inflation as having bottomed and calculated breakeven point for this maturity attractive

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

In their preview of today's auction, Westpac has outlined their expectations for inflation and see it beginning to rise after the September numbers due out next week. Westpac believes inflation has reached its cyclical bottom. They note the breakeven inflation point for the 2035 issue is attractive compared to other maturities. The breakeven inflation rate is a market-based measure of expected inflation. It is the difference between the yield of a nominal bond and an inflation-linked bond of the same maturity.

The relative real yield offered on NZ bonds is higher than global counterparts and this also makes this tender attractive.
 

2.50% - 20 September 2035 Today #584 Previous #581 Previous #579 Previous #576 Previous #570 Previous #567
Series offered tender Oct. 13, 2016 tender Sept. 8, 2016 tender Aug. 12, 2016 tender Jul. 14, 2016 tender
May. 12, 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 51 35 47 42 50 43
Total Amount of Bids Received ($mln) 308 317 224 147 257 293
Total Number of Successful Bids 15 12 21 20 27 5
Highest Yield Accepted (%) 1.920 1.685 1.585 1.865 1.910 2.140
Lowest Yield Accepted (%) 1.880 1.660 1.535 1.825 1.885 2.140
Highest Yield Rejected (%) 2.010 1.800 1.645 1.990 2.100 2.320
Lowest Yield Rejected (%) 1.920 1.685 1.585 1.870 1.910 2.140
Weighted Average Accepted Yield (%) 1.9016 1.6738 1.5696 1.8460 1.8968 2.1400
Weighted Average Rejected Yield (%) 1.9495 1.7142 1.6189 1.9055 1.9824 2.1902
Amount Allotted at Highest Accepted Yield as Percentage of Amount Bid at that Yield* 50.0 70.0 86.7 100 27.8 66.7
Coverage Ratio 3.80 3.17 2.24 1.47 2.57 2.93

*Individual allotments may vary due to rounding.

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