The New Zealand Debt Management Office (NZDMO) auctioned $200 million 20 September 2025 inflation-indexed New Zealand Government bonds today with a successful weighted average yield of 1.4240%.
Inflation is currently running at 0.95% which would mean a nominal yield of 2.374%.
By comparison the yield on 10-year NZ government stock which is not inflation adjusted is 3.55% p.a.
This latest tender was also heavily over-subscribed with a coverage ratio of 3.285 times.
Details of the tender follows.
Tender Date: Thu, 7 Mar 2013
Bids close: 2.00pm
Results: From 2.05pm
Settlement Date: Tue, 12 Mar 2013
| Series Offered | 2.00% 20 Sept 2025 |
| Total Amount Offered ($million) | 200 |
| Total Amount Allocated ($million) | 200 |
| Total Number of Bids Received | 45 |
| Total Amount of Bids Received ($million) | 657 |
| Total Number of Successful Bids | 14 |
| Highest Yield Accepted (%) | 1.440 |
| Lowest Yield Accepted (%) | 1.400 |
| Highest Yield Rejected (%) | 1.960 |
| Lowest Yield Rejected (%) | 1.440 |
| Weighted Average Accepted Yield (%) | 1.4240 |
| Weighted Average Rejected Yield (%) | 1.6471 |
| Amount Allotted at Highest Accepted Yield as Percentage of Amount Bid at that Yield* | 79 |
| Coverage Ratio | 3.285 |
*Individual allotments may vary due to rounding.
1 Comments
Government bonds today with a successful weighted average yield of 1.4240%.
Inflation is currently running at 0.95% which would mean a nominal yield of 2.374%.
Is this particular tender issue not dated 20/09/2025? - therefore the time horizon is 12.5342 years - thus by default the yield reflects inflation adjusted return (real) expectations out to this horizon - not dated inflation data release adjustments.
A better analysis would involve calculating the "breakeven" inflation rate, utilising the current nominal 10 year government note, 5.5%, 15/04/23s, currently trading @ 3.73% yield - not 3.55%.
Calculate the spot 10 year interpolated swap rate minus the 10yr govie yield to get the spread, which is ~ 36.6576 bps over.
Calculate the interpolated spot 12.5342 yr swap rate, which is ~ 4.2242%.
Deduct the 10 year swap over 10 yr govie spread to get a rough extrapolated 12.5342yr govie yield, which is ~ 3.8576%
Deduct today's inflation bond issue tender yield, which gives ~ 2.4336% - the priced "breakeven" inflation rate (expected inflation) over the time horizon in question.
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.