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The government issues NZ$1 billion worth of debt in record breaking bond tender

The government issues NZ$1 billion worth of debt in record breaking bond tender

The government will issue NZ$1 billion worth of bonds after the biggest ever tender by its debt management office today received bids worth almost NZ$3 billion.

The New Zealand Debt Management Office's latest bond tender offered and sold NZ$200 million worth of two-year bonds and NZ$800 million worth of eight-year bonds. A total of NZ$705 million worth of bids were submitted for the two-year issue, giving it coverage of just over 3.5 times. A massive NZ$2.25 billion worth of bids were submitted for the eight-year issue giving it coverage of almost three times.

There were 13 bids for the two-year bonds (maturing on April 15, 2013) with five successful at the narrow range of 3.50% to 3.51%, and 31 for the eight-year issue (maturing March 15, 2019) with 12 succeeding in a 5.61% to 5.62% range. The two-year bond has a coupon rate of 6.5% and the eight-year 5%.

The New Zealand dollar rose to US80 cents after the bond auction results were announced.

The tender is due to settle on April 28.

The NZDMO has previously raised NZ$950 million twice in tenders this year - one during March and the other in January - as investors embrace New Zealand's relative safety as Europe's sovereign debt crisis rumbles on and after Standard & Poor's this week threatened to downgrade its "positive" outlook on the United States' AAA credit rating. S&P currently has New Zealand's domestic currency rating at AAA with a stable outlook. Our foreign currency rating is AA+ with a negative outlook. About 60% of government bonds are bought by overseas investors.

Analysts at the ANZ recently predicted the government could issue the equivalent of about NZ$4,500 worth of debt for every New Zealander this financial year, or almost NZ$20 billion, as it soaks up strong investor demand and raises money to help rebuild Christchurch after the devastating February 22 earthquake. The NZDMO increased its domestic bond programme for the current 2010/11 fiscal year by NZ$1.5 billion to NZ$16.5 billion earlier this month.

The NZDMO issued NZ$2.8 billion worth of government debt in March, its biggest monthly total ever.

Government debt

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27 Comments

Why cant they offer us the two year at 6.5%????????

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They seem to be front-loading their borrowings for this year. One eye on Europe perhaps ?

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Yes, Treasury is watching Europe very closely - Whitehead said Spain is the key. Big trouble if the Euro crisis goes past Spain

http://www.interest.co.nz/news/52460/treasury-monitoring-price-bubble-c…

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Look closely at Germany - there is indications that the German CB is not going to bail out their banks. This from The Economic Policy Journal with comments.

German Finance Minister Wolfgang Schaeuble has recommended that no German banks on the verge of collapse should expect bailout money from the German Govt. According to Reuters, two mainstream German lenders, Helaba and NordLB, could fail during the next round of more stringent European bank Stress Test. Some real stress could be actually put to the exercise, unlike the charade last time both in the US and
Europe. The results are due in June. Schaeuble is resolute in his position. He said, "If the results of the tests show a need for fresh capital, the bank owners are there to cover these needs. It is not the case that one can appeal to the state. The funds of Soffin (German's bank rescue fund) are not available for any new requests. It is no longer like in 2008 that there are no alternatives. We have an insolvency law." Schaeuble wants to require German savings banks and regional states with major stakes of ownership in the two lenders to prop up the banks, and therefore not turn to the German Govt fund for rescue. One can infer from a domestic bank aid policy so tight, that further German participation in more bailouts of the PIIGS sovereign debt is not to be tolerated. Both  Helaba and NordLB are small banks. The real test is for larger and more influential banks need money, like DBank. The stage is set for some banks in
Germany to falter, fail, and fall.

 

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Problem is if they are not bailed out then they collapse and the finiance system freezes up....no one would like that.

regards

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Thats what the banks would like us to believe.

What would happen if the banks were not bailed out is that the failing bank would be gutted. Bad lones written off to true valuations and deposits and good loans carried forward into a new structure. The owners of the banks and the bond holders would lose everything, and justifiably so.  The banks would reopen on Monday under a new name, with a clean slate and solid foundation. It would be no different to any other business that fails. 

What is happening now is that the citizens are being expected to make whole the bankers losses. Nothing is being written off, and the govt spends tax payer money to prop up an insolvent banking system.

This extend and pretend can never work. All banks know that they are insolvent, they also know that all the others are insolvent. It is this level of insolvency within the system that causes the system to freeze up. If the regulators went in there and gutted the system, there would be severe pain for the system, like amputating a limb with gangrene.

Instead they are frantically applying more bandages, hoping to keep the festering sores covered and praying that there will be a miracle cure. It ain't gonna happen.... Instead of losing a limb and moving on, we will instead see the death of the whole economy due to oppressive taxes and monetary black holes.

 

 

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I think you are very wrong and the evidence says you are worng....the entire banking system would freeze up, and this almost happened last time....no transfers woudl take place between banks, then no eftpos no businees buying or selling....one huge grid backlock.

Banks losses? if you look at NZ its in property its our losses the banks are just middlemen..

Extend and pretend, I agree its jsut a Q of how long defore we go into a depression, simple....

Oppressive taxes, you have not seen anything eyt me thinks....at top rate of 50% is easy to see...

regards

 

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Gareth  - By their own admission the government raised NZD 2.350 billion in publicly traded notes and NZD 319 million in Tbills. Hence total issuance for March was NZD 2.669 billion.

A small difference I know.

Govt stats can be viewed here:

http://www.omo.co.nz/NZDMO%20Tbills%20&%20notes%20on%20issue.xls 

Real time total government debt owed can be viewed here:   

http://www.omo.co.nz/NZ_Government_Debt_Countdown.xls 

Alex - While Whitehead has his views others may be more pertinent in the sense the government may be front running the need to deal in real money. Read more: 

http://dharmajoint.blogspot.com/2011/04/s-downgrade-be-afraid-be-very-afraid.html 

This is the first sign of the reality - dealing in real currency - even if it be only seeds:     http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10720449 

 

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Stephen, the NZ$2.8 billion March figure came from ANZ.

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It's great when banks are encouraging govt to sell more bonds, another $4,500 per person.  Cool another $225 in interest per person.  Trouble is there are 4 people in my house and I'm the only one that has a job, and I don't mind paying a bit of interest for the unemployed and unemployable.  I hope the govt borrows more so I can make the super funds even more productive.   

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Party time...slurrrpppp...hic!

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Why can't the Reserve Bank start printing money instead of borrowing it - a bit like the US QE but not by buying bonds back?   That just helps the Banks.  Although on second thoughts that might be all right becuse then the Banks wouldn't borrow offshore. If the Banks were required to pay back their overseas borrowing then that would let the NZ taxpayer off the hook. Just print the damn stuff.  It can't be any worse than borrowing.  In fact a  lot better because there would be no interest to pay.

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Nice dream Pat but the need to be recognised as having a currency independent of idiot politicians is the critical factor. Lately that independence has been weakened by Key's comments that his govt lowered the interest rates(ocr). Dumb statement.

Printing as you suggest is Zimbabweconomics.........

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So is US QE also Zimbabweconomics?  And how does borrowing differ?  Surely that is Zimbabweconomics too

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You got it Pat...the only difference is some toilet paper is seen as better quality....and the US toilet paper is the one used to conduct international trade...ours is not....the US Fed Reserve is the 'high court of the banking world' and Bernanke is the current 'King'.  Threaten that banking judiciary of crooks in the way that Mugarbage did and you can expect a currency attack from Bernanke that will destroy your nation's money. Zimbabwe was buggered by the Fed policeforce.

The RBNZ would only resort to the "printing" rort with the ok from the Fed....and that is not likely to happen...more likely the fed would extend as it has already a window to the RBNZ through which it could "borrow" US$ at almost zero rates....the aim would be to ensure the system was not pulled apart.

Putting it bluntly, Bernanke has the power to triple the cost of credit to the NZ govt overnight....and he would do so if the game here is not played to the fed's rules. 

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Truly Wally or are you making it all up?   Have you any references I can read on the subject?

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It's the truth Pat in plain language...like if you wanna play Rugby you gotta play by the rules and do what the rule makers say...try another route and you will not get any games.

The Fed runs the game. The RBNZ plays by the Fed rules.

Try the market oracle and search the database for info.

 http://www.marketoracle.co.uk/

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Interest rate would be way worse....If we print we debase the $NZ, ppl who lend to us then want a higher interest rate to compensate them for the $s they get back being worth less, but a double whammy we but debt with NZD so we'd have to give away more..........then think like essentail imports,  oil, the NZD would be worthless it would cost a small fortune to get petrol....$3 a litre, $5 a litre.....

Savers and OAPs would be destitute........

so we cant print....

regards

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okay Steven, nobody said it wouldn't be painful and the same will happen when our dollar drops, but if imports cost more then that gives us an opportunity to start a manufactoring base in NZ and employ people.  Why wait for the IMF? The IMF has now approved controlling the exchange rates which will have the same effect as printing money.  I cannot see the wisdom of being a lemming and being too scared of the "fed police" as Wally said, to do anything.  If you print money then it is what you do with it that makes all the difference. The US, where I am now, just gave it to the Banks for god's sake where it was used for the carry trade.  The roads, the bridges, the water reservoirs, the powers stations in the US are all in a mess and if that money had been used to clean up all that infrastructure then there would be employment.  Virtually every state is bankrupt and they all seem to have their head in the sand.  NZ can do better.   For nearly thirty years we have had the worst economic policy mankind could devise and it is time to change it.  Are we men or mice? 

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Employ ppl in NZ by collapsing the $....a typical chinese worker earns about $70 a MONTH....the biggest or the two biggest are labour and oil (energy), we import oil....so if we collapse our $ oil becomes significantly more expensive. Once we get to about 6~8% GDP spent on energy we will go into and stay in a recession....we just cant win that way.

The IMF doesnt approve anything in terms of mattering until we borrow money from them....When we collapse our $ we get massive internal inflation, its happening in places from china to brazil....

Lemming? fed police? wolly has no idea frankly....

It should have been used to clean up the infrastructure but the US Congresss etc said no....the GOP is a bunch of loony extremist right wingers hell bent on destroying America...my advice, leave.

Economic policy.....no the US has had the worst, well maybe, china's looks bad...change it to what? spend like crazy? thats just the path to hell....it makes no odds anyway, oil production has peaked the world's economies now have to cope with expensive oil and even scarcity so they and ours will start to shrink.....this great shrink is going to take 30 years....30 years of grief.....it will make the GD look like a walk in the park...

GFC it isnt.....thats just a for-bearer.....We've had the Long Depression, The Great Depression....here now is another, welcome to the beginning of the Great Austerity...

regards

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You are mixing your pills with booze steven....do try to stick to plain English.

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Sorry Ive decided I cant find a plain and simple enough english to get down to your level of understanding.

regards

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When is the government going attend their own savings working group?

Good thing they cut those taxes ay, they obviously just had too much money just laying around.

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Glad to see you are happy with the govt stealing more of your money...  Increasing the taxes does not make for a better place to live. If people are struggling to live on 70% of their income, will it get any better on 60%?  Or 50%?

If you are feeling that generous, and want to divest yourself of an extra 5 to 10%, my bank account number is available on request for your direct deposits. I look forward to hearing from you.

On a more serious note, we need to wake up and smell the cyanide... big government is poision, and taxes are theft - purely and simply.  Look no further than Robin Hood - he didn't steal from the rich and give to the poor - he stole the taxes back from the government and returned them to the people whom the govt had taken from in the first place, with naked force and brutality .

I guess the one saving grace from out more civilised masters is that the stealing is accomplished by deduction rather than at the point of a sword...

Sadly we are on the path to economic colapse to large unsustainable debt. The only way for this to be resolved is through pain and suffering of those people who believed the fairy tales of borrow and grow rich. Or we pander to those people who rolled the dice, by spreading the load to those who didn't gamble, and the country goes down the toilet as the govt sucks up productive capital - in essence the parasite kills the host.

Either way we are buggered... 

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"big government is poision, and taxes are theft - purely and simply. "

I tiny, extremist/fundi view point...ppl choose a society.....if you dont like NZ's why not leave?

Find a nice little tax haven somewhere.

regards

 

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Can you please explain to me why you consider government and society to be one and the same?

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Okay Steven what do you suggest should be done?

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