Govt may widen range of debt securities

The government is keen on resuming the issuance of inflation-indexed bonds and is considering increasing the range of debt securities offered by the New Zealand Debt Management Office.

 

Friday, 19 February 2010

by Paul McBeth

In its 28-page response to the Capital Market Development taskforce's 60 recommendations, Commerce Minister Simon Power said consultation would take place this month with a view to recommence issuance inflation-indexed bonds by May. The security was introduced in 1996 and suspended three years later, though Eriksen & Associates managing director Jonathan Eriksen vouched for their return early last year.

The government document said it would give ongoing consideration to longer-term debt and foreign currency debt as other options to raise money, and potential retail issues would be investigated along with why there was a lack of participation in government debt products.

One way the government hopes to entice investment from offshore investors is by cutting the 2% approved issuer levy for some public issues of debt to zero. The government expects to report back in the second half of the year on the proposal, for a possible inclusion in a tax bill later this year.

The paper supported the recommendation to develop a local government bond bank, with work already underway, though the large number of partners has ensured it is a slow progress. Finance Minister Bill English, who has responsibility for these two matters, will make a final decision on a bond bank by the end of next month.

The Debt Management Office, which raises money for the government through the sale of debt securities, has brought forward its bond programme to take advantage of historically low interest rates as the government cut back its overall debt programme over the coming four years.

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