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NZ trims debt sales programme as economic recovery lifts fiscal outlook

Thursday 20th May 2010

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New Zealand’s Debt Management Office cut its bond sales programme by $2 billion over 2010/11, saying an improving fiscal outlook means it doesn’t have such a large government cash shortfall to plug. 

NZDMO Treasurer Phil Combes said total bond issuance over the coming year will be $12.5 billion this fiscal year, less than the $14.5 billion it projected in December. It will be looking to raise $39 billion over the next four years, with the annual programme dropping to $6 billion in 2013/14.  

As part of the programme, Combes said the NZDMO is considering reintroducing inflation-indexed bonds, with feedback indicating “there is enough potential interest” in the securities. Issuance of these bonds would begin this year.  

“Our preference is to establish a new benchmark inflation-indexed bond and we are currently considering the most cost-effective issuance method,” he said.  

The Rob Cameron-led Capital Markets Development Taskforce report into how to build the nation’s capital markets advocated the NZDMO introducing new securities and encouraging more access to government debt.  Combes said the office plans to introduce a new nominal eight-year bond early next financial year, and is consulting on secondary market participation by the NZDMO, bond switches and bond repurchase programmes.  

New Zealand and Australian government debt has been popular with offshore investors due to the nation’s strong fiscal position, according to Gerard Fitzpatrick, a fixed-interest portfolio manager with Russell Investments in London.  “Our global bond fund is currently overweight for Australia and New Zealand,” he said.  

Finance Minister Bill English reiterated his desire to bring the country’s net down to below 20% of gross domestic product by the early 2020s, at a media conference before his budget speech.

Net debt is forecast to peak at 27.4% of gross domestic product in fiscal 2015, a year earlier than had been projected in the half-year update, which had debt reaching 30.4% of GDP by 2016. 

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