Treasury has issued $4.5 billion of New Zealand Government Bonds due to mature on May 15, 2041.
The issue - made via syndication - was over-subscribed, with investors putting $8.5 billion on the table.
The New Zealand Debt Management Office, which is part of Treasury, said: “The bonds, which carry a coupon of 1.75%, were issued at a spread of 31 basis points over the 15 April 2037 nominal bond, at a yield to maturity of 1.64%. Total book size, within the initial pricing guidance range of 29 to 36 basis points, exceeded NZ$8.5 billion.
“Settlement will occur on 21 July 2020 and further issuance of the new bond will not occur prior to October 2020.”
Treasury in May forecast it would issue a total of $60 billion of New Zealand Government Bonds in the year to June 30, 2021. It will revise this forecast when Treasury releases its Pre-Election Economic and Fiscal Update on August 20.
Pre-Covid-19, Treasury only expected to issue $10 billion of New Zealand Government Bonds in 2020/21.
The Reserve Bank (RBNZ) has committed to buying up to $60 billion of mostly New Zealand Government Bonds on the secondary market by May 2021, as a part of its Large-Scale Asset Purchase programme (otherwise known as quantitative easing).
This means investors know there’s a buyer for the bonds, should they choose to on-sell them.
Since launching the programme in March, the RBNZ has bought $19.7 billion of New Zealand Government Bonds.
The RBNZ is expected to commit to buying even more bonds - possibly to the tune of $100 billion - when it releases its quarterly Monetary Policy Statement on August 12.
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Comment from the UK this evening on a similar scheme of arrangement:
"Everyone would like to feast off the Magic Money Tree. It's all free children."
https://www.telegraph.co.uk/business/2020/07/13/massive-debt-write-off-…
The Reserve Bank (RBNZ) has committed to buying up to $60 billion of mostly New Zealand Government Bonds on the secondary market by May 2021, as a part of its Large-Scale Asset Purchase programme (otherwise known as quantitative easing).
This means investors know there’s a buyer for the bonds, should they choose to on-sell them..
Indeed. Banks are clearly keen to monetise government debt given the very significant over subscription rates witnessed for this syndication and the previous one.
Equally, they are keen to be in receipt of RBNZ OCR interest paid to the them when they sell these bonds in exchange for central bank reserves while contracting balance sheet exposure to the private sector.
Banks see few profitable commercial opportunities which encourages them to lend, hence interest rates remain low and the liquidity of government bonds offers the return of money, if not a return on it.
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