The government will issue a specific bond open only to New Zealand residents to contribute to a NZ$5.5 billion fund earmarked specifically for the rebuilding of Christchurch.
The special Kiwi Bond would have a term of four years and pay an interest rate based on wholesale government bond rates, with the initial interest rate set at 4%, Finance Minister Bill English said.
The new four-year bond was similar to a term deposit and available to New Zealand residents from today, English said.
“This is a great opportunity for Kiwi investors who want to help fund the Government's contribution to the multi-billion dollar recovery in Canterbury, while still getting a solid return on their money,” English said.
“The bond will be like other Kiwi Bonds, but investors can be assured that all money invested will be used to help meet the expected NZ$5.5 billion in direct costs to central Government from the two Canterbury earthquakes,” he said.
“The Government is borrowing the bulk of that money in the short-term and the Earthquake Kiwi Bond provides a way for local investors to contribute and help reduce the amount New Zealand needs to borrow overseas.”
The new bond wouldbe issued by the New Zealand Debt Management Office as part of its debt issuance programme.
Treasury would not say how much it expected to raise through the bond, although it is understood they expect to halt the declining rate of investment in KiwiBonds. There are about NZ$270 million worth of Kiwi Bonds currently outstanding.
Meanwhile, English also announced the government would introduce a long-term inflation indexed bond.
Interest.co.nz understands the bond would likely have a maturity in September 2025, matching a similar one in Australia. Although pricing had not been decided yet, the bond could offer a real yield of about 3%.
The bond would be offered when it was cost effective to do so, and is expected later this year.
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