14 Mar 2016
NZD: Kiwi bond update – TDS
Annette Beacher, Chief Asia-Pac Macro Strategist at TDS, notes that the NZ services sector accelerated in Feb, the PSI accelerating from 55.4 in Jan to 56.9 in Feb led by sales, new orders and employment.
Key Quotes
“Offshore bond ownership picked up 68.3% of all debt on issue from 67.6%. The two lines that saw offshore ownership rise were the 12/17s and 09/25s.
The proportion of NZGBs held for non-residents was 68.3% in February, within the rising trend since the low of 59.1% in late 2011. The expansion of NZGB issuance and outsized highly-rated yields brought this asset class onto the radar screen of many large global investors in recent years.
By maturity, the highest proportion of bonds held offshore are for the 2021 and 2023 maturities at 80+%. The new April 2033 is just 36.6%, but the April 2027 share has jumped from 28% held offshore in late 2014 to nearly 61% now.
The next bond maturity is December 2017, so not an issue for the NZDMO for some time.
Looking ahead, the December NZDMO bond program update announced that “Subject to market conditions, a new 15 April 2025 nominal bond is expected to be launched, via syndication, in the second half of 2015/16”. So that window is between now and end-June.
Recent syndicates: $NZ2b of Apr 2027 issued on July 2014, then $NZ1.5b of (linker) Sep 2035 (Nov 2014) and then 2015 saw just the ultra-long April 2033 ($NZ2.0b). We believe around $NZ2b of the April 2025 would suit the current market looking for yield in such a low inflation environment, whether the RBNZ eases again or not. When the syndicate is announced, we will publish our indicative pricing.”
Key Quotes
“Offshore bond ownership picked up 68.3% of all debt on issue from 67.6%. The two lines that saw offshore ownership rise were the 12/17s and 09/25s.
The proportion of NZGBs held for non-residents was 68.3% in February, within the rising trend since the low of 59.1% in late 2011. The expansion of NZGB issuance and outsized highly-rated yields brought this asset class onto the radar screen of many large global investors in recent years.
By maturity, the highest proportion of bonds held offshore are for the 2021 and 2023 maturities at 80+%. The new April 2033 is just 36.6%, but the April 2027 share has jumped from 28% held offshore in late 2014 to nearly 61% now.
The next bond maturity is December 2017, so not an issue for the NZDMO for some time.
Looking ahead, the December NZDMO bond program update announced that “Subject to market conditions, a new 15 April 2025 nominal bond is expected to be launched, via syndication, in the second half of 2015/16”. So that window is between now and end-June.
Recent syndicates: $NZ2b of Apr 2027 issued on July 2014, then $NZ1.5b of (linker) Sep 2035 (Nov 2014) and then 2015 saw just the ultra-long April 2033 ($NZ2.0b). We believe around $NZ2b of the April 2025 would suit the current market looking for yield in such a low inflation environment, whether the RBNZ eases again or not. When the syndicate is announced, we will publish our indicative pricing.”