New 2013 benchmark bond announced

The Debt Management Office (DMO) said today it would introduce a new benchmark April 2013 bond at its next tender on May 31.

Bond dealers said the new bond would bring New Zealand more into line with Australia, which offers a May 2013 benchmark 10-year bond.

The offer of $175 million of 2013 bonds would run alongside an offer of $175 million in February 2005 bonds, the DMO said in a statement released through the Reserve Bank.

Both maturities carry a 6.50 per cent coupon.

There is $2.875 billion in the current long bond - the benchmark November 2011s - on issue and the Treasury's preference is to issue around $3 billion of each maturity, dealers said.

The market also needed a new 10-year bond maintain relativities with other markets.

Market expectations were for a new 10-year benchmark ranged from a late 2012 to a 2015.

Dealers said offering the existing February 2005 along side the 2013 was a logical step, given the current illiquidity of that maturity.

The new 2013 bond will take six or seven tenders to gain sufficient liquidity of around $1 billion, they said.

One dealer said there would be immediate interest to pick it up just to maintain duration positions.

The market was awaiting details of the Government's Budget, which will start to be released from 2 pm.

This will include the DMO's announcement of its 2001/02 bond tender programme.

Dealers said the DMO may also choose to cancel the last tender in the current fiscal year, scheduled for June 21, because of the government's improved financial position.

Dealers expected a $2.8-$3 billion tender programme for 2001/02.

- REUTERS