By Gareth Vaughan
Strong interest in the Government debt manager's new AAA rated long-term bond has sparked total bids of NZ$1.947 billion for just NZ$300 million worth of government bonds offered for sale, or cover of more than six times, in the New Zealand Debt Management Office's latest bond tender.
A total of NZ$942 million worth of bids were submitted for the newly introduced bond. Initially announced in the Budget, it has an April 15, 2023 maturity date. Just NZ$100 million worth of the bonds were offered for sale. A total of 39 bids were submitted with just five successful. Offering a 5.50% per annum coupon, the successful bidders will receive less, between 5.24% and 5.27%. The 2023 bond carries an AAA credit rating from both Moody's Investors Service and Standard & Poor's.
Announcing details of the new bond earlier this week the NZDMO said demand for longer maturity government bonds had been strong in recent months, supporting the introduction of a bond maturing in April 2023. See ANZ's assessment of fair value for the new bond.
"Over time, the new 2023 bond will become the next 10-year benchmark bond. It will also assist with the pricing of a new September 2025 inflation-indexed bond," the NZDMO said.
Some of the strong demand has been coming from China's big sovereign wealth fund, the China Investment Corporation, which interest.co.nz was recently told has 1.5% of its money assigned for New Zealand investments.
the NZDMO is issuing NZ$20 billion of debt in this 2010/11 June 30 end financial year as it soaks up strong investor demand and raises money to help rebuild Christchurch after the devastating February 22 earthquake. The NZ$20 billion is equivalent to NZ$4,500 for every man, woman and child, or 10% of the country's Gross Domestic Product (GDP).
Of the other two bonds on offer in today's tender, a total of NZ$425 million from 11 bidders was submitted for the April 15, 2013 bond and NZ$580 million from 15 bidders for the April 15, 2015 bond. See full details of today's tender results here.
2 Comments
Gareth I find it astonishing that we have gone from Under-subscribed issues a few months ago to strong demand a few weeks ago , and now oversubscibed by 300%
All the while , our economic fundamentals have not really changed or even improved . They may have actually got worse. Our deficit is huge , we have the elephant in the room in terms of the unknown quantum of the Chch rebuild, and the threat of credit markets freezing over Euro debt issues is greater than in 2008.
WHERE IS THE DEMAND COMING FROM?
It cannot be only Chinese demand for our debt driving this.
I would wager that American Bond traders are skeptical of US economic issues and zero % returns , and some South East Asian traders (in Singapore , KL and even HongKong ) looking for diversity away from Euro , Pound and Dollar markets. Are they sticking their stash here?
Either way , its a window of opportunity for Treasury to lock in some long term borrowing at very good-looking rates.
We're still the lucky country, and even if Bernard is the naysayer , we'll be alright..
Have a good weekend .
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