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NZ Government Starts Building New Benchmark Bond Maturity

Fuseworks Media
Fuseworks Media

Wellington, May 4 NZPA - The Government is introducing a longer-dated bond to its bond sales programme in the hope it can establish a new benchmark 10-year bond for the local debt market.

It is also considering introducing a bond with a maturity of longer than 15 years, which borrowing programmes in other countries have.

The New Zealand Debt Management Office (NZDMO), which manages the issuance of government bonds, said it would offer a bond maturing on May 15, 2021 in its next bond tender on May 7. The coupon, or interest rate the bond pays, will be announced on May 6.

Once issued, or sold, government bonds trade on what is known as a secondary market.

Investors like liquidity in this market and this is achieved by selling bonds the market adopts as so-called benchmark maturities.

Finance Minister Bill English said the market's preference was for a longer-dated bond that could become a new ten-year benchmark bond.

"Issuing longer-dated bonds was also one of the recommendations from the Prime Minister's Jobs Summit in February and I'm pleased to be able to quickly achieve this," Mr English said.

The NZDMO said it has already completed $4.1 billion of the $4.5 billion programme for the 2008/09 year and has decided to increase the size of the programme to $5.5b. This means the Government will borrow more via the sale of domestic bonds in the current financial year than previously signalled.

This will allow bond sales of around $150 million per week for the remainder of the fiscal year.

The 2009/10 domestic debt programme will be announced on May 28 in conjunction with the Government's budget.

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