Treasury unit issues $4 billion New Zealand government bond after receiving more than $18 billion worth of interest from investors

Treasury unit issues $4 billion New Zealand government bond after receiving more than $18 billion worth of interest from investors

New Zealand Debt Management (NZDM), the Treasury unit that oversees government borrowing, has issued a $4 billion bond after receiving bids of more than $18 billion.

Due to mature on May 15, 2028, the bonds have a yield to maturity of 0.305% and were issued at a spread of 13 basis points over the government's April 15, 2027 bond.

"Total book size, within the initial pricing guidance range of 13 to 17 basis points, exceeded NZ$18.0 billion. Settlement will occur on 4 November 2020 and there will be no further issuance of the new bond prior to January 2021," NZDM says.

That $18 billion total book size is the biggest to date for a NZ government bond.

The final term sheet is here.


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Real question: what happens to government bonds if the currency fails and hyper-inflation kicks in as it did in Zimbabwe? Anyone know?

I think it goes like this.. but maybe some finance guys can chime in

If a bond has a coupon of $1000 and yield of 0.1% (and infinite time to maturity) then from simple math it pays out $1 per year. If interest rates say halve to 0.05% then the value of the bond must double to $2000 because that's the amount required to achieve the nominal yield of $1 per year in the new interest rate environment.

CPI is already manipulated downwards, and central bankers have explicitly stated they'll look past inflation for whatever reasons, so there's no chance of bond yields ever increasing. If CPI runs at 15% pa then they'll just change the definition of CPI so that it's 1%, and I think that's called "inflation targeting"... joke. Seriously though twenty years ago gold was $20 per gram and now its ~$92 per g. If you invert that to see how much gold a dollar purchased then in 2000 it was 50 mg/NZD and in 2020 it's 10.86 mg/NZD so you could say that the NZD has lost ~78% of it's gold purchasing power in 20 years.

What proportion of these were bought by the main trading banks who then are on selling to Adrian Orr for a margin as part of keeping the Treasury and the RBNZ independent?
I would buy them myself and on sell them to Adrian Orr and take a margin.
We are a State run Capitalist economy.
Its defacto MMT when there is no plan about how these can be paid back.

ANZ Bank New Zealand Limited; Bank of New Zealand; UBS AG, Australia; and Westpac Banking Corporation, New Zealand; are Joint-Lead Managers for the issue.

The current list of approved Registered Tender Counterparties are:

ANZ Bank New Zealand Limited
Bank of New Zealand
Commonwealth Bank of Australia
Deutsche Bank AG, Sydney
J.P. Morgan Securities Australia Limited
The Toronto-Dominion Bank, London
UBS AG, Australia
Westpac Banking Corporation, New Zealand.

First you need to establish the same conditions as Zimbabwe - and New Zealand is not even remotely nearthere.

So you are worrying over nothing.

Treasury unit issues $4 billion New Zealand government bond after receiving more than $18 billion worth of interest from investors

Cripes the demand for pristine liquid collateral is insatiable. Our economic outlook must be more precarious than some are busy capitalising in the residential property market. There is an increasing chance falling interest rates are forecasting a future fall in asset cash flow values, hence current present values are not sustainable no matter how much the discount factor is cut. Current leveraged property asset values are also susceptible to downside revisions.

With all the major global parties now heavily invested in MMT, it's as the average punter without any fancy economics degree has suspected all along - there's no such thing as "too big to fail".

Its not called open market bond auctions, its called DEBT MONETISATION or increase from 83 billion in 2018 to 132 billion in Sept YTD 2020. 60% increase and only a 1/4 held by non-residents. Essentially ORR is nationalizing the economy.

Yes we are a State run Capitalist economy