The New Zealand Debt Management Office (NZDMO) received bids worth more than NZ$1.5 billion for its record equally NZ$950 million government bond tender today.
The results of the tender show a total of NZ$1.542 billion worth of bids for the three bonds on offer. A total of NZ$300 million worth of bids were submitted for the NZ$150 million April 15, 2013 bond which has a coupon rate of 6.5%, NZ$611 million worth of bids were submitted for the NZ$400 million March 15, 2019 bond which has a coupon of 5%, and NZ$631 million was submitted for the NZ$400 million May 15, 2021 bond which has a coupon of 6%.
The NZDMO said there were a total of 19 successful bids (of 28 bids in total) across the three bonds. The weighted average successful yield for the 2013 bond was 3.44% 3.42%, 5.38% 5.36% for the 2019 bond and 5.6% 5.56% for the 2021 bond.
The yield on the 2013 bond was 3.41% at 10 am this morning and the 2021 bond yield was at 5.58% at the same time.
Earlier today the NZDMO said it had lifted the value of government bonds on offer at today's tender by NZ$500 million to NZ$950 million, citing strong investor demand. The NZ$950 million tender is the biggest government bond tender on record alongside another worth NZ$950 million in January this year.
“We are offering the additional March 2019 and May 2021 bonds due to strong investor demand that became apparent after we made our announcement yesterday,” NZDMO Treasurer Philip Combes said in a statement.
Asked by interest.co.nz who and where the strong investor demand had come from Combes said he couldn't provide specific details. He noted, however, that it was unusual to receive such a late spike in demand, which came after the NZDMO yesterday outlined its plans for today's tender. The heightened demand for New Zealand government bonds comes as international focus on Europe's sovereign debt crisis increases again as Portugal's government collapses.
Combes said although there's renewed interest in May's Budget and the government's fiscal position since the devastating February 22 Christchurch earthquake, New Zealand still stacks up well from a debt perspective compared with many other countries.
"All debt sustainability measures have New Zealand ranked very well compared to the vast majority of other countries," said Combes.
The strong demand is a stark turnaround for the NZDMO from a bond tender a month ago on February 24, the first after the earthquake, when a tranche of government bonds received no bids whatsoever for the first time ever.
Last week's tender saw the NZDMO raise NZ$250 million.
The NZDMO has now raised NZ$12.55 billion this financial year, meaning it's closing in on the NZ$13.5 billion targeted by June 30. Combes told interest.co.nz last week that being ahead of schedule on its planned 2010-11 debt raising meant the NZDMO now had the option of raising more than planned this financial year.
And news of the massive government bond tender comes after Finance Minister Bill English said last week the government would increase borrowing to help fund the rebuilding of Christchurch after the earthquake.
(Updates add tender results, comments from Philip Combes).
NZ Government bond rates
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8 Comments
1) here is a rough idea on the rates
http://www.rbnz.govt.nz/statistics/exandint/b2/data.html?sheet=1
2) who buys Govt bonds?
a) hedge funds
b) retirement funds (may include hedge funds)
c) investement banks (e.g. the bank that does gods work)
d) private banks (e.g. Rothchilds)
e) central banks
f) managed funds (e.g. Pimco, Blackrock)
etc.
@jfal013 Thanks for the link
I know who the usual suspects are for acquiring Bonds , but who are the buyers in this specific case .
I have invested in Bonds previuosly ( I exited in December '10) , and watch the market closely. I exited too soon , but at least I sleep well at night .T
The Bond market at present is like a watering hole on the Serengeti in the dry season , someone is going to get eaten. I imagine David Attenbourough whispering as the drama unfolds
I was wondering who the buyers are who are prepared to take such risks when the writing is on the wall in the medium term ( 2 years)
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