Budget 2005: $2.2bn bond programme announced

The Debt Management Office (DMO) today announced a $2.2 billion domestic bond programme for 2005/06.

The programme would consist of 11 tenders with issuance of July 2008 and December 2017 bonds expected to continue.

The DMO also announced what effective amounts to private funding for the planned Orewa to Puhoi toll road.

There would $160 million of new infrastructure bonds issued by the DMO to fund the road.

The design and launch of the new bonds would depend on Transit New Zealand's funding requirements, which are yet to be finalised.

The DMO said ongoing improvements in the Government's fiscal forecasts meant overall future borrowing requirements would be "modest".

The department said it recognised there were concerns in the debt market about the declining volume of government securities with related liquidity implications.

It said it would take steps to mitigate against these.

The DMO said there was $2.4 billion in cash available for debt repayment in 2004/5.

It would continue smoothing the size of the bond programme from year to year to provide a steady supply of new bonds to the market.

The resulting cash would be used to pre-fund part of future years' borrowing requirements.

In the year to June 2006, the cash surplus is forecast to shrink to $30m and then in subsequent years fall into deficits of $1.6 billion, $2.8 billion and $1.4 billion respectively.

The DMO said transactions in the New Zealand dollar swap market would continue to be a feature of the DMO's management activity.

To assist meeting its portfolio management objectives, the DMO said it intended to adopt a more flexible approach to securities issuance.

With that in mind it said it was considering issuing up to $200 million of this year's programme into previously closed bond maturities.

Regular treasury bill outstandings would be maintained at over $5 billion but these could be raised to $6.5 billion.

- NZPA