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Massive demand for 2029 NZ govt bonds: $5B bid for $2B on offer

Tuesday 13th March 2018

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The New Zealand Debt Management Office's sale of a new April 20, 2029, bond was 2 1/2 times overbid as investors looked to lock in attractive long-term interest rates ahead of what looks to be a gradual rise in global interest rates. 

The DMO issued $2 billion of the 2029 bond via syndication after announcing plans to issue $1.5 billion to $2 billion.  The bonds, which carry a coupon of 3 percent, were issued at a spread of 16 basis points over the yield on the existing April 15, 2027, nominal bond, at 3.135 percent. Total book size, within the initial pricing guidance range of 16 to 19 basis points, exceeded $5 billion. Settlement will occur on March 16, 2018, and further issuance of the new bond won't be made prior to July 2018, the DMO said. 

"It was in line with what we were expecting. We were expecting good demand and a $5 billion order book is good demand," Sarah Vrede, director, Financial Operations at the DMO, told BusinessDesk.

While demand was strong, Vrede said the DMO didn't opt to issue more as "we didn't have the funding needs for more of them."  

In December, the DMO lifted its issuance programme by $1 billion through June 2022 compared to its prior forecasts and reiterated plans to launch the new bond in the first half of this year. According to the DMO, the office will raise $7 billion every year through June 2022, bringing total issuance to $35 billion.


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