NZ Treasury raises a record $7b from monster bond issue

The Treasury has has raised $7 billion in what is understood to be New Zealand's biggest ever bond offer.

The Treasury has successfully raised $7 billion in what was understood to be the biggest ever capital raising in New Zealand's history.

NZ Debt Management (NZDM), part of the Treasury, said the offer of May 2024 bonds through a syndication attracted more than $14b in bids. The bonds were sold at a yield of 0.4275 per cent.

The $7b offer was as big as the entire 2017/18 bond programme.

Interest was such that NZDM increased the 2019/20 bond programme by $4b to $29b, which may allow the Treasury to "pre-fund" part of next year's borrowing requirement.

"I believe that it was the biggest ever capital raising in New Zealand," ANZ strategist David Croy said.

"It is certainty the biggest ever bond issue that we have ever seen here," he said.

Market strategists said the successful issue would take a bit of the funding pressure off next year.

The Treasury had initially specified a minimum target amount of $2b but did not set a cap.

The amount raised reflected the high level of interest so the deal was "upsized", Croy said.

Bloomberg said results echoed similar sales in other developed markets, with Australia also raising a record amount of funds recently.

Westpac senior markets strategist Imre Speizer said investor appetite was strong, aided in part by the relative stability of the domestic interest rate markets, given the Reserve Bank's commitment to keep its official cash rate on hold until next year and its bond buying programme.

Hamish Pepper, fixed income and currency strategist at Harbour Asset Management, said the successful issue reflected the fact that rates were close to zero in many parts of the world, due to widespread quantitative easing by central banks.

The previous record for a syndicated New Zealand bond sale was $3.5b, set at April's auction of May 2031.

The sale comes after the Reserve Bank almost doubled its quantitative easing programme to $60b, which is aimed at keeping a lid on rates while the economy recovers from the effects of the Covid-19 pandemic.