NZ to launch 12-year bond

Monday 4th May 2009

New Zealand will offer a 12-year bond at its auction this month, after feedback from investors, as the government weighs options for developing the domestic market to cover rising budget deficits.

The Debt Management Office will offer May 2021 bonds in the May 7 tender and is considering sales of 15-year debt, Finance Minister Bill English said in a statement. The 12-year bonds will become the new 10-year benchmark.

“Issuing longer-dated bonds was also one of the recommendations from the Prime Minister’s Jobs Summit in February and I’m pleased we’ve been able to act quickly on this,” English said.

“With the Government’s borrowing requirements forecast to increase to fund projected deficits in the Crown accounts in coming years, (the government) was considering options for developing the domestic bond program,” he said.

No decision has been made on selling 15-year bonds, which would put the nation in step with other nations, English said.

The current 10-year bond, which matures in December 2017 and pays a coupon of 6%, was recently quoted at 5.4%, according to Reuters data.

The Treasury is predicting budget deficits will widen, starting this year, as the global economic slump slows tax revenue and the government brings forward spending on infrastructure.

The government plans to add $8.6 billion in new capital projects in the next six years.

Businesswire.co.nz

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