Bond programme expanded by $6.5b

(BusinessDesk) - The Debt Management Office has expanded its programme for issuing bonds by $6.5 billion over the next four years and flagged it will sell a further $7 billion in debt the following year.

The DMO will issue $14 billion in bonds in the 2012/13 year, an increase of $500 million from the budget, and sell an unchanged $10 billion the following year. That will see some $200 million of nominal bonds in each of the tenders in the March quarter next year, it says in a statement.

The office added $2 billion to the 2014/15 programme for $10 billion in issuance, and raised its 2015/16 forecast by $4 billion to $ 7 billion.

"We're expanding the borrowing programme over the next few years because the surpluses will be smaller than forecast - that is a concern," Finance Minister Bill English says.

The Treasury now sees net debt topping out at $75.9 billion in 2016/17, though that's a smaller percentage of gross domestic product than in the two previous years.

Mr English told a media briefing in Wellington the government will need to consistently produce surpluses of $2 billion to $3 billion if it wants to achieve its debt repayment targets in the future.

The DMO will embark on a mid-curve bond in the near future, with an April 2020 maturity likely, it says.

Its inflation-linked bond programme will see tenders begin on Feb. 7 next year, with $200 million offered each week for the remainder of the fiscal year.

The maximum tranche size will be set $6 billion, and is expected to make up between 10 percent and 20 percent of the government's issue bonds.


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