NZGB increased by $1bn from $7bn to $8bn for the year ended June 2017 - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the treasury’s half-year fiscal update has resulted in little change overall to the NZGB issuance program.

Key Quotes

“The Treasury’s half-year economic and fiscal update today depicted an improved fiscal position compared to the May Budget, thanks to higher tax revenue commensurate with the stronger economy.”

“The NZGB program has been increased by $1bn from $7bn to $8bn for the year ended June 2017 (possibly related to earthquake costs), but decreased by $1bn for the 2020 year, leaving the 2017-2020 total unchanged.”

“The NZDMO announced its intention to issue a 2040 inflation-indexed NZGB via syndication by 30 June 2017.”

“Debt level projections are lower than they were in May, below 25% of GDP which compares favourably with most developed countries. Global investors should view this fiscal update favourably.”

“Debt levels are projected to decline over time but not at a fast enough pace to hurt secondary market liquidity. Anecdotally, the threshold for an adverse impact on liquidity is around $50bn in outstanding’s.”

“There was little reaction in the swap or NZGB markets to the HYEFU, although the NZD rose a touch. The 2025 swap spread was unchanged at15bp.”