NZ Debt Management Office, flush with cash, postpones 10-year bond tender

The NZDMO wants investors to wait until after the half-year fiscal update.

The New Zealand Debt Management Office postponed the launch of an April 20, 2029 nominal bond to 2018, saying the government is flush with cash and it wants to give market participants an opportunity to evaluate any new information that may be contained in the half-year fiscal update.

The yield on New Zealand's fell 9 basis points to 2.78 percent, matching a two-month low, as "the market priced had obviously priced more bonds at the long end," said Ross Weston, a senior trader at Kiwibank. He said he viewed the news as positive because it meant the government books are in a solid position "with cash in the tin".

In May, the DMO said the bond was expected to be launched before Dec. 31 and today it said it would take place between Jan. 1 and June 30 next year.

"The timing of this transaction has been postponed due to the stronger than expected core Crown residual cash position, as detailed in the financial statements of the government of New Zealand for the year ended 30 June 2017," it said.

The government's books to June 30 showed a bigger-than-expected residual cash surplus of $2.57 billion and compared to a deficit of $1.32 billion a year earlier.

Also, the NZDMO "notes this postponement will provide market participants with the opportunity to evaluate any new information contained within the half-year economic and fiscal update 2017, prior to launch of the transaction," it said.

The HYEFU will contain the new government's growth and spending forecasts and Finance Minister Grant Robertson has said it could contain a mini-budget to enact new fiscal policies. Ahead of the election, the Labour Party said that compared to the Treasury's pre-election fiscal projections it would run smaller operating surpluses over the next five years and take on more debt to pay for extra spending.

The Debt Management Office had forecast total gross bond issuance to increase by $35 billion between June 2017 and June 2021.