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Bill opens up investor access to local Government bonds

Retail investors will be able to access high-quality local Government bonds next year after Parliament passed the Local Government Borrowing Bill.

Thursday, September 15th 2011, 2:23PM

The legislation paves the way for the creation of a 'bond bank', The New Zealand Local Government Funding Agency (LGFA), which will allow local authorities to borrow money at lower interest rates than they can at present.

The Bill has been overseen by Minister of Local Government Rodney Hide, who said the LGFA would issue local Government bonds to investors then on-lend the funds raised to participating local authorities.

Hide told Parliament, "The operation of the agency will also strengthen New Zealand's capital markets by providing a new high-quality investment option. The scheme is a win-win for local Government and investors."

Around 50 local authorities have indicated they will take part in the scheme, and the new agency will also be able to borrow money from overseas, something councils cannot do.

Hide also said the Funding Agency will save local Government around $25 million a year.

The Agency's bond issues will be conducted by Treasury's Debt Management Office, though the bonds will not be Government guaranteed.

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