Offshore investors buying New Zealand credit with caution

Across the Tasman Sea, ANZ National (International) Ltd was the standout issuer last week, raising US$1.25 billion in the US s144A market. The three-year funds were priced at 105 basis points over US Treasuries without a government guarantee.

The issue takes total offshore bond issuance by New Zealand borrowers for the year to the equivalent of NZ$12.8 billion, just ahead of the 2008 total of NZ$12.3 billion.

In the domestic market, ANZ National completed a NZ$100 million retail bond issue on Friday. The bonds were priced at 105 bps over swap for a June 2013 maturity.

According to our records, domestic corporate bond issuance is still some way short of the 2008 record of NZ$10.6 billion, at NZ$9.4 billion.

The New Zealand Debt Management Office advised the market of its revised bond funding plans for the remainder of fiscal 2010 and forecasts for the following three years. The government bond program for this year will be increased to NZ$10.5 billion, from NZ$8.5 billion, to allow continuing regular issuance should market conditions remain favourable. Fiscal year to date issuance currently stands at NZ$6.8 billion.

As a result of this and other changes to the expected government borrowing requirement, expected bond issuance in 2010/11 has been reduced to NZ$10.5 billion from NZ$11.5 billion and to NZ$12.5 billion from NZ$15 billion for each of 2011/12 and 2012/13. A borrowing requirement of NZ$7.5 billion was flagged for 2013/14.

The total gross borrowing requirement over the next four years is now NZ$46 billion, NZ$4 billion below Budget estimates.