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Latest bond tender of NZ$300 mln received bids for $683 mln with weighted average accepted yield of 2.3204% (versus 2.2455% previously)

Latest bond tender of NZ$300 mln received bids for $683 mln with weighted average accepted yield of 2.3204% (versus 2.2455% previously)

The New Zealand Debt Management Office (NZDMO) auctioned $300 million 20 September 2025 inflation-indexed New Zealand Government bonds with a successful weighted average yield of 2.3204%.

Inflation is currently running at 0.7% which would mean a nominal yield of 3.0204%.

By comparison the yield on 10-year NZ government stock which is not inflation adjusted is trading at approximately 4.19% p.a. (previously 4.31%)

This latest tender was also over-subscribed with a coverage ratio of 2.2767 times.

  Current Previous
Series Offered 2.00% 20 Sept 2025 2.00% 20 Sept 2025
Total Amount Offered ($million) 300 300
Total Amount Allocated ($million) 300 300
Total Number of Bids Received 74 47
Total Amount of Bids Received ($million) 683 446
Total Number of Successful Bids 20 37
Highest Yield Accepted (%) 2.350 2.330
Lowest Yield Accepted (%) 2.300 2.100
Highest Yield Rejected (%) 2.770 2.430
Lowest Yield Rejected (%) 2.350 2.340
Weighted Average Accepted Yield (%) 2.3204 2.2455
Weighted Average Rejected Yield (%) 2.4504 2.3663
Amount Allotted at Highest Accepted Yield as Percentage of Amount Bid at that Yield* 84 68
Coverage Ratio 2.2767 1.4867

*Individual allotments may vary due to rounding.

Tender Date: Thu, 1 August 2013

Settlement Date: Tue, 6 August 2013


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This article I think gives a misleading comparison between inflation linked and nominal bonds for the average reader.  The most important thing is the differential between the real yield of the inflation linked bond (in this case 2.32%) and the yield on its nominal equivalent (4.19%). The difference of 1.87%, known as break even inflation rate, is the amount of inflation on average, the market expects over the life of the bond.  So, ignoring any natural preference for protecting yourself against inflation, if you think that inflation will be higher than 1.87% p.a. until 2025 then this inflation linked bond looks like better value than its nominal equivalent and vice versa. 


I have tried in the past to direct the author to the commonly accepted way of analysing Inflation linked bonds/notes, namely - the breakeven inflation rate


My past effort is seemingly unworthy of attention