Embargoed until 12.30pm
New Zealand Debt Management Office
Update to the 2007/08 Domestic Debt Programme
In conjunction with the release of the Government’s Half Year Economic and Fiscal Update, the New Zealand Debt Management Office (NZDMO) announced today that the Government’s 2007/08 domestic bond programme will remain at up to $2,500 million as announced at the time of Budget 2007.
While the fiscal outlook shows the Government continuing to strengthen its fiscal position over the forecast period, the bond programme is forecast to be maintained at $2,500 million in each year. Continuing issuance supports bond market liquidity, which is important in preserving the Government’s ability to fund cost-effectively over the medium term.
Measures to Improve Bond Market Liquidity
Given current concerns over the lack of liquidity in the government bond market, the NZDMO also announced the following initiatives aimed at improving liquidity:
- increasing the target level for each bond maturity from $4,000 million to $4,500 million;
- delaying the introduction of a new ten-year bond in order to concentrate issuance into fewer and larger maturities;
- moving to a more frequent tender schedule that offers two tenders per month; and
- introducing “tap” tenders to take advantage of pockets of demand as they occur.
“We are introducing these new measures following consultation with market participants,” said NZDMO Treasurer, Philip Combes. “The market has told us that a new ten-year benchmark bond is not required immediately and so we will look to continue issuance of the December 2017 bond and other existing bond maturities in line with our funding requirements.”
“The twice-monthly tender schedule and the introduction of tap tenders are an extension of the more flexible approach to bond issuance which we have adopted since 2005,” said Mr Combes. “The new tender schedule will be introduced in January 2008. Tender composition will continue to be announced two business days prior to each tender.”
“Tap tenders will be identical to scheduled tenders but are expected to be less frequent in nature. They are designed to offer additional flexibility to issue bonds to the market at times when strong demand builds up outside the regular tender schedule. We will be providing further details in the first quarter of 2008.”
“We are also working on the provision of a government bond repurchase facility to lend additional support to bond market liquidity. We anticipate that market consultations will take place in the first half of next year.”
Bond Tender Schedule – January to March 2008
|Tender Number||Announcement Date||Tender Date||Settlement Date|
|248||15 jan 2008||17 Jan 2008||23 Jan 2008|
|249||29 Jan 2008||31 Jan 2008||5 Feb 2008|
|250||12 Feb 2008||14 Feb 2008||28 Feb 2008|
|251||26 Feb 2008||28 Feb 2008||04 Mar 2008|
|252||11 Mar 2008||13 Mar 2008||18 Mar 2008|
|253||25 Mar 2008||27 Mar 2008||01 Apr 2008|
The $438 million of Infrastructure Bond funding anticipated for the 2007/08 fiscal year has been reduced by $173 million to $265 million due to changes in the timing of forecast expenditure. So far this fiscal year, $100 million of Infrastructure Bonds have been issued.
Treasury Bill Programme
The NZDMO intends to continue offering between $100 million and $200 million of three-month treasury bills each week while it is cost-effective to do so.
Philip Combes | Treasurer
Tel: +64 4 917 6133
Andrew Turner | Head of Portfolio Management
Tel: +64 4 917 6071