Savers who use the Treasury's Kiwi Bond offers will want to know they cut them on Thursday (today), perhaps surprising given the next expected Official Cash Rate cut is still 25 days away.
The interest rate 'curve' is still inverted but less so. It is now almost flat at 3.75% for most terms offered.
Treasury (or more precisely, the Debt Management Office of Treasury) last set these rates on October 17, 2024.
For subscriptions of $1,000 - $500,000 they are now at:
| Maturity | change | Rate |
| 6 months | -50 bps | 4.00 percent per annum |
| 12 months | -50 bps | 3.75 percent per annum |
| 2 years | none | 3.75 percent per annum |
| 4 years | none | 3.75 percent per annum |
The official announcement is here.
Savers who value government-guaranteed term deposits now have to put up with after-tax rates that are not much better than Consumers Price Index inflation. That was running at 2.2% in the December 2024 quarter. The 3.75% Kiwi Bond one year offer translates to 3.10% for taxpayers on a 17.5% marginal tax rate, to 2.94% for taxpayers on the 21.6% tax rate, 2.63% for those on the 30% tax rate, and to 2.59% for those on the top 31% tax rate. A tax-paid 'real' return is still there, but it is skinny now.
And don't forget, the "risk-free" aspect of Kiwi Bonds will get substantially diluted after the Depositor Compensation Scheme comes into effect mid year. The public will be standing behind private financial institutions to $100,000 at each of the qualified ones. However, those looking for risk-free returns for amounts above $100,000, Kiwi Bonds will remain an option.
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