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Debt Management Office to sell inflation-indexed bonds from October

Tuesday 11th September 2012

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The New Zealand Debt Management Office, which sells government bonds to help fund the executive's spending programme, will offer inflation-indexed notes from next month and has appointed a syndicate to aid with issuing the debt.

The debt issuer appointed ANZ National Bank and Deutsche Bank as the joint lead managers for the syndicate to help sell the debt, with HSBC and RBS in Australia as co-managers, it said in a statement yesterday. The DMO will sell the bonds, which protect investors against inflation devaluing their assets, from Oct. 1 depending on "suitable market conditions." The debt will probably mature on Sept. 20, 2025, it said.

"Inflation-indexed bonds are intended to provide long-term cost-effective funding for the government and to provide investors with a hedge against inflation," the office said.

The DMO flagged it would sell up to an annual $2 billion of the inflation-linked securities in the 2013 and 2014 fiscal years, after signalling it was looking at reissuing the debt in 2010.

The office last sold inflation-indexed bonds in 1995 maturing in 2016 and paying annual interest of 4.5 percent. The debt had an indexation value of $2.05 billion, or 3.3 percent of the government's total debt outstanding, as at Aug. 31, according DMO figures.

Re-launching the securities was a recommendation of the 2009 Rob Cameron-led Capital Markets Development Taskforce report into how to build the nation's capital markets to help improve investor access to the government's debt programme.

BusinessDesk.co.nz

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