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NZDMO looks for trans-Tasman harmony in inflation-indexed bonds

The New Zealand Debt Management Office wants a September 2025 maturity date when it resumes the sale of inflation-indexed bonds to bring the securities into line with Australia.

Friday, July 9th 2010, 10:40PM

by Paul McBeth

In Treasury advice on budget, the NZDMO said it wants the bond to be in line with Australia after receiving positive feedback on the May 2021 bond, which matched the maturity date of an Australian government bond, as it helped investors compare the local market.

The government has $1.171 billion face value, or $1.618 billion including the inflation component, of its February 2016 bond outstanding in the market after it was suspended in 1999 when it was no longer cost-effective comared to nominal bonds. The NZDMO is considering offering a facility to let existing debt holders of the 2016 bond switch into the new issue.

The NZDMO said it would prefer to launch an inflation-linked bond through a syndication that would ultimately provide a vehicle for retail investors to invest in.

An offer of inflation-linked securities would meet one of the recommendations of the Rob Cameron-led Capital Market Development Taskforce Report, and partially meet another by increasing debt issues available to retail investors.

The NZDMO proposes to hold a private placement for a small group of investors to test the appetite for pricing for an inflation-indexed bond.

Though the office removed the timing and volume of issuance, it said if it sold US$4 billion of debt and was deemed sufficiently liquid, the bonds would likely qualify for the Barclay's Capital Government Inflation-Linked Bond Index, helping generate further demand among fund managers who would be expected to buy them.


Paul is a staff writer for Good Returns based in Wellington.

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