The New Zealand Debt Management Office (NZDMO) announced today an increase in the 2010/11 government bond programme from $12.5 billion to $13.5 billion, having already completed $7.8 billion (62%) of the original programme.
The increase provides flexibility for continued regular nominal bond issuance should market conditions remain favourable and allows for the potential introduction of a new inflation-indexed bond.
Table 1: Forecast Gross and Net Bond Issuance
| $ billions | 2010/11 | 2011/12 | 2012/13 | 2013/14 | 2014/15 |
|---|---|---|---|---|---|
| Gross Bond Issuance | 13.5 | 13.5 | 13.0 | 9.5 | 10.0 |
| Net Bond Issuance | 13.5 | 5.5 | 3.0 | 9.5 | 0.0 |
"The current year represents the peak in terms of net issuance," said NZDMO Treasurer, Mr Philip Combes. "Forecast average net funding requirements are considerably lower than this year."
The following table shows contributions to the change in forecast bond issuance against Budget 2010 forecasts over the comparable 2010/11 to 2013/14 fiscal years.
Table 2: Contributions to change in Forecast Bond Issuance
| $ billions | |
|---|---|
|
Larger cash deficits |
3.8 |
| EQC reducing holdings of government securities | 1.2 |
| Assumed pre-funding of April 2015 bond maturity | 3.5 |
| Increase in net issuance | 8.5 |
| Larger April 2013 tranche size | 2.0 |
| Increase in gross issuance | 10.5 |
Increase in target tranche size
To further promote bond market liquidity, the target tranche size for bonds has today been increased from $8 billion to $10 billion. The NZDMO does not anticipate issuing further significant volumes of the November 2011 bond.
Inflation Indexed Bonds
In September, the NZDMO announced the banks selected for its inflation-indexed bond syndication panel. Preparations for the launch of the bond are almost complete, with February the next opportunity to undertake the transaction.
ENDS
Treasury Contacts
Philip Combes | Treasurer
Tel: +64 4 917 6133
Andrew Turner | Head of Portfolio Management
Tel: +64 4 917 6071