Investor interest in new 30-year NZ government bond tops $19.1 billion

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

21st Feb 24, 2:44pm by Gareth Vaughan

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.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

9 Comments

by WestieAJ | 21st Feb 24, 2:57pm 1708480671

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

by JimboJones | 21st Feb 24, 3:09pm 1708481396

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

by WestieAJ | 21st Feb 24, 3:26pm 1708482376

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.

by Jonny.Foe | 21st Feb 24, 3:17pm 1708481831

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.

by Audaxes | 21st Feb 24, 4:30pm 1708486219

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.

by Jonny.Foe | 21st Feb 24, 5:54pm 1708491277

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.

by Audaxes | 21st Feb 24, 7:24pm 1708496671

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

by ChrisOfNoFame | 21st Feb 24, 3:59pm 1708484399

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

by Jonny.Foe | 21st Feb 24, 4:13pm 1708485211

exactly - not surprising there was high demand.