Govt fails to raise all it seeks from debt sale

Latest Treasury bill tender not fully subscribed

31st Aug 10, 3:14pm by David Chaston

Todays’s tender of Treasury bills by the Debt Management Office could hardly be characterised as a resounding success.

$350 million was being offered in 3, 6 and 12 month bills and the DMO only filled $305 million and only got that much by accepting more than it was looking for in the 6 months, resulting in a relatively wide range of 7 bp on successful bids in that maturity.

"An early consequence of the SCF receivership announcement together with the amended government deposit guarantee rules is a failed NZ Government T Bill tender", said Stephen Hume who follows the bond markets at www.omo.co.nz

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21 Comments

by David George | 31st Aug 10, 3:41pm 1283226060

"An early consequence of the SCF receivership announcement together with the amended government deposit guarantee rules is a failed NZ Government T Bill tender"

That's a hell of a shortfall, didn't Bill say the SCF debacle wouldn't affect our creditworthiness?

by powerdownkiwi | 31st Aug 10, 3:56pm 1283226960

And four years interest free.

Business as Usual never sounded more illusional

Sorry Bernard, forgot you wanted it in song today:

No you won't believe in If anymore

It's an illusion

It's an illusion

No you won't believe in If anymore

If is for children

If is for children

Building daydreams

by Bernard Hickey | 31st Aug 10, 6:35pm 1283236534

Lovin' your style

cheers

Bernard

by MartynC | 31st Aug 10, 4:29pm 1283228971

Can't the Reserve Bank just follow the lead of the Fed & the BoE & lend the Govt the money it was short

by Gertraud T. | 31st Aug 10, 5:17pm 1283231820

@ anonymous

"We can just make it up".

Yes, and devalue our currency by doing this.

Is this new to you? Read up a little.

by KanucK | 31st Aug 10, 5:27pm 1283232421

Japan's currency is currently increasing in value - even as they expand the monetary base.

by MartynC | 31st Aug 10, 8:21pm 1283242873

Wasn't this the reason members of the Labour party wanted to Nationalise the Reserve Bank back in 1935, to provide cheap loans to the Government for public works etc?

by Andrewj | 31st Aug 10, 4:35pm 1283229343

Looks like we are going to get to pay higher interest rates. We can get the money but at what cost Mr Hulme? This is a vote of 'no confidence'

by powerdownkiwi | 31st Aug 10, 7:39pm 1283240370

I guess you'd have a go at unsustainable jobs?

'onya.

by ruru | 31st Aug 10, 7:37pm 1283240231

@Mr Joke: I hope you're in Government.

by KanucK | 31st Aug 10, 5:29pm 1283232553

Perhaps "people" realize they are better off with a bank term deposit yielding 2-3% more than govt bonds? Or hell - since there is no risk by investing in finance companies at 8%+ maybe they'll stick their money there??

by Wolly | 31st Aug 10, 5:50pm 1283233844

So the 2 billion minus the foreign handout, will head for the banks and the banks will turn on the credit sausage machine to produce about 18 billion in credit ready for the spring offensive on the idiot Kiwis. Throw in Kiwibanks govt underwritten foreign borrowings and hey presto we have us a few months of cheap credit driven splurging madness right up to the election. Who thought the govt gave a rat's about property being seriously unaffordable?

This amounts to QE....no ifs and no buts. A two billion dollar injection into the south island economy. Mostly paid for by Aucklanders! haha.

by KanucK | 31st Aug 10, 5:57pm 1283234240

Agreed that this is not a wise move for the long term view...

This sets a dangerous precedent which is not sustainable.

But human nature will prevail.

by Wolly | 31st Aug 10, 5:25pm 1283232311

Do you wear a funny hat Iain?

by Wolly | 31st Aug 10, 5:55pm 1283234143

Errrr arrrrrm.... didn't you borrow some of that capital to buy property Iain!

Gosh...I have "banking buddies"...well I never....

by Wolly | 31st Aug 10, 6:41pm 1283236915

Hey don't blame me...you're the one paying interest to them. Imagine a world where people had to save if they wanted stuff like houses...the price of property would be... oh about 1920 levels. people could afford a place. I blame the borrowers for all the mayhem.

Here's your homework Iain...mind you learn it all by heart. http://en.wikipedia.org/wiki/Thorium

by Gummy Bear Hero | 31st Aug 10, 8:03pm 1283241827

What a great dish-of-ointment : Splendid message / But why NO CAPS-LOCK ON ! SHOUT MY FRIEND , and they WILL LISTEN .

And failing that , YOU'LL ANNOY OLD HICKEY : That's a measure of SUCCESS AROUND HERE !

SHOUT TO THE WORLD : " I'M MAD AS HELL , & KNOT GONNA TAKE IT ANY MORE ." ...................................... yeah , then break out the GUMMY BEARS .............

"WOW" the AUDIENCE ! .............. WAKEY WAKEY PLEBIAN FOOLS ...............

by Kris | 31st Aug 10, 9:29pm 1283246940

The tone of this article is misleading. Unless you have an understanding of reserve accounting and fiscal finance its probably confusing at best.

All this does (like any other govt debt auction) is convey signals to the RB and Treasury re the Treasury market. It does not mean the govt is unable to raise funds.

Similar to how a loan from a bank creates the deposit to be borrowed back (either directly, from another bank or via the RB), govt spending creates the 'non-borrowed' reserves to be mopped up with Treasuries. Notwithstanding RB market operations.

Paradoxically, the govt will have more to 'borrow' the more it spends. As the Treasury is not directly part of the banking system, thus a transfer of funds from the Treasury into the banking system raises the level of reserves able to be 'borrowed'

There can be any number of reasons for an auction to 'fail' almost all of which are technical, none fundamental. The RB sees this and works it into its market operations.

And, NZ (and all other debtor nations) dont so much borrow from overseas, as foreign domiciled entities choose to hold NZD denominated obligations. (Two sides to every coin).

As we have all seen in recent months - when the going gets tough - bondholders interest payments get cut. As such, bondholds are not prices setters, but price takers.

The NZ govt can never be forced to pay higher premiums unless the RB conducts its operations in such a way as to support higher rates, say to support a stronger dollar perhaps.

by Gummy Bear Hero | 1st Sep 10, 5:41am 1283276489

Primary bond dealers sell junk rated securities to kids year 5 - 13 . Secondary bond dealers sell higher grade corporate debt to high school children ................ Yessssssssssss , Iain ?

Hey , how's the book going , " The Complete History of the Labour Party in NZ " , got alotta forward orders ?

by Wolly | 1st Sep 10, 7:44am 1283283861

I think he's punnishing himself Gummy Bear H.... for having helped those who created the credit with interest attached ....and then he went and made it all real by using the credit to buy a property that he could have saved up for and now he knows the real problem is not the boogie man who creates credit with interest attached...but that fools rush in and borrow it. Oh the pain the pain of it all. The more fools there were...the higher the prices went....the more they borrowed.

by Gummy Bear Hero | 1st Sep 10, 8:21am 1283286076

Can't wait for his book .................... 'Cos it's still frosty ......... And we're low on firewood !