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BNZ issues NZ$225 million of covered bonds domestically, says continuing to mull €500 million European issue

BNZ issues NZ$225 million of covered bonds domestically, says continuing to mull €500 million European issue

By Gareth Vaughan

The Bank of New Zealand (BNZ) has sold NZ$225 million worth of six-year covered bonds, presumably to a local institutional investor or investors, and says it's still assessing a possible covered bond issue of at least €500 million (NZ$807 million) to European institutional investors.

BNZ's New Zealand dollar denominated issue, its fifth covered bond issue overall, was outed by credit rating agencies Moody's and Fitch late yesterday when they issued reports rating the bonds Aaa and AAA, respectively.

Covered bonds, secured by a "cover pool" of residential mortgages written by the bank issuer, typically attract these highest possible credit ratings because investors have dual recourse to the bank and mortgage pool collateral should the issuer default. See more on covered bonds here.

Asked by for details on who the investors were and what rate over swap the bonds were priced at, BNZ Treasurer Tim Main declined to comment. It's BNZ's second covered bond private placement and closely follows a NZ$300 million one by rival ASB to the Accident Compensation Corporation (ACC) just before Christmas.

European issue on ice?

Meanwhile, despite reports from Reuters, Bloomberg and Dow Jones suggesting the BNZ has postponed this week's plans for a European covered bond issue, Main said the bank was still assessing the European situation.

Reuters reported BNZ had postponed the proposed five-year issue due to "lukewarm investor feedback" after taking indications of interest at an initial price range of euro mid swap plus 125 to 130 basis points on Monday, European time.

On Monday, New Zealand time, Main told the BNZ hoped to take advantage of a window of opportunity in "a market that has become a little less frozen" to raise some money to help pre-fund projected funding needs for the coming year.

BNZ's European push comes in the same week its parent, National Australia Bank, issued a £500 million, three-year floating-rate covered bond at 145 basis points over the three-month Libor.

'Wave of bank issuance'

Grant Hassell, head of fixed income at AMP Capital, said he was anticipating a "wave of bank debt issuance" this year meaning investors don't have to rush into deals in the first few weeks of the year. AMP hadn't invested in the latest domestic BNZ covered bond issue. He noted private placements tended to be less liquid meaning the investors needed to hold them to maturity which suits government entities such as the ACC.

Hassell said he expected some very large domestic covered bond issues this year, perhaps as high as the NZ$500 million range. Covered bonds are currently all the rage with Australasian banks which Hassell said is because that's what institutional investors are currently prepared to buy due to their dual security.

"That doesn't signify a strong (debt) market," said Hassell.

ASB's parent, Commonwealth Bank of Australia, sold A$3.5 billion worth of five-year covered bonds this week at a price of 175 basis points over the swap rate in what Bloomberg described as the biggest ever offering of financial debt denominated in the Australian dollar.

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Commonwealth Bank of Australia sold $3.5 billion of five-year covered notes to yield 175 basis points more than swap rates yesterday in the biggest ever offering of financial debt in the currency. That's higher than the spreads paid by the nation's four biggest banks on benchmark domestic senior bonds in data compiled by Bloomberg since 1991.


What does the Aussie market know that hardly causes a ripple of concern here? It would be interesting to know if the Future Fund is stepping up to buy the Aussie banks' domestic housing assets as ACC did here and other similar entities I suppose now. 


It seems we are in the midst of a back door government sponsored bank funding programme at distinctly higher rates than those being offered to retail depositors. 


Covert money printing anyone?  Can the RBNZ keep the lid on rates for much longer before the punters wake up to the reality they are being ripped off, irrespective of collapsing vegetable prices? The banks' spinmeisters are already out touting a poor outlook thus defending the indefensible.   


This is a story of heightened bank credit risk predicated on poor growth prospects and hence all lenders rewards should be higher as the institutional investors are demanding.


Not lower as the NZMEA demands.   


You misrepresent what we have called for.

Read again.

If our prescription had have been followed as suggested where would we be now? If we follow our prescription, as advocated, why would there be a problem?

We are keen for savers to have a better return. NZ depositors that is.

Cheers, Les.



In your own post Les

NZMEA Chief Executive John Walley says, “With problems continuing in Europe and a weak domestic economy, inflation pressure is likely to remain low for a prolonged period. That means every effort should be made to bring down the exchange rate to support the export sector. That means an Official Cash Rate cut next week and more policy changes over time.”


Sure, most certainly, a cut in the OCR is long overdue, but that doesn't mean savers should be penalised or potential inflation pressures be ignored, quoting from our media release:


"A better strategy for the Reserve Bank would be to:

• Target non-tradeable inflation;

• Use Loan to Value Ratios to control credit volumes; and

• Specify the amount of savings (deposits) banks are required to raise in New Zealand to limit offshore exposure.

“Had this been done 10 years ago debt levels and servicing costs would have been lower even if average interest rates had been higher.  Overall the New Zealand economy would now be better balanced with higher wages, more jobs, more savings and better housing affordability,”


Do you think we are right with the outcomes in that last paragraph? What does anyone else think?


Cheers, Les.



In Topic: Tyler Durden and Paul Krugman agree! – The EU is toast!

18 January 2012 - 10:15 AM

There is no way to sustain economic growth by attaching interest to money.

By demanding more than you supply.

Eventually the suppliers reach their maximum potential to supply the demand for exponential growth and the so called exchange for mutual benift system implodes.

Eventually the slaves reach their maximum potential and can no longer supply the masters whit what teh masters demand.

taking more than you give to sustain growth is teh same as chopping down trees faster than they regrow to sustain growth.

You have two options.

Impose austerity measures prior to running out of trees by stopping the chopping down of trees faster than they which point your economy stops growing and begins contracting.


Don't impose austerity measures prior to running out of trees and just continue chopping them down faster than they regrow until you can' which point your economy stops growing and begins contracting.

You all are only becoming aware of reality now because the economic activity required in order to sustain the fantasy world you all live within is reaching it's maximum potential to sustain the fantasy you all think is reality.

recessions are causing you all to gatch glimpses of the destiny you all are headed to...recessions are what happens when the chopping down of trees faster than the yregrow operation slows...recoveries happen when you all resume the operation.

But you all will reach a point where it becomes impossible to continue...a point where you all are forced against your will to continue.

A point where you all will be forced to accept the austerity measures you all have been fighting against acceptance of for the past 6 decades.

Have you ever had your feelings hurt by someone in a superior position?

Like they do things that hurt you but there is really nothing you can do about it because they are your boss and can basically fire you if you complain?

That is what teh USA has been doing to the people of the world for the past 60 years...Unfortunately the enterprise the USA was made the boss of back in 1944 is entering into bankruptcy.

It's business model was based on taking more from the world than it gave back in order to sustain economic growth...and now the employees. or bottom are unable to supply the demands of the boss or top.

The believers of the religion or bottom can't supply the demands of the religion or top.

It's all going to come crashing down one way or the other and send you all to where you have been trying for the past 6 decades to avoid going...Where you need to go as opposed to where you want to go.

To Truth instead of away from Truth.

The top lives off the yield from the bottom.

The top employs the bottom to supply everything to the top whoelsale...the top then mark it up and sell everything to the bottom retail.

The difference between the whoelsale cost and the retail price is the yield the top lives off of.

Like I employ you to supply me with a $1.00 and then I sell it back to you for $1.05...the yield from this exchange for mutual benifit is $0.05 or 5%

if you fail to or refuse to supply me with what i demand...then I will replace you...Like with a Chinese worker...

The top grows richer in power by taking more power than they give from the bottom while the bottom grows poorer in power by giving more power than they take from the top.

When the bottom or employees are utilized to their maximum potential and can no longer supply the demand for yield by the top or employer.


The USA is not a country or is just an economic zone...A sub hierarchical power amassing enterprise within the global hierarchical power amassing enterprise.

The EU is also just a sub hierarchical power amassing enterprise...that depends upon the USA's ability to project force within the global hieraerchy to sustain the flow of power from the bottom to the top.

You can send an aircraft carrier to a location and demand power...but if the supply can't give the demand what it wants...then...It's Austerity time.