NZ Government Bonds

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perhaps the govt should have waited for todays issuance until all the SCF funds have percolated.

Latest Treasury bill tender not fully subscribed

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thoughts on how the earthquake could affect interest rates ?

I see pressure to sell bonds by the EQC - apparently their 6 billion fund is largely invested in NZ govt bonds - causing some pressure on rates to rise.

[Alan3285]

thoughts on how the earthquake could affect interest rates ?

I see pressure to sell bonds by the EQC - apparently their 6 billion fund is largely invested in NZ govt bonds - causing some pressure on rates to rise.

Thinking out loud:

EQC may need to sell bonds (as per Peat) - Supply up, price of bonds down (yield up), interest rates up

Govt may need to borrow to pay for repairs - Supply of bonds up, price of bonds fall, Demand for money up, price of money (interest rates) up


So, yes, I would expect interest rates to rise on this, but whether it is big enough to have a lot of impact I have no idea.

Also possible that IF (not saying this is so) rates were falling already, then this just mitigates that fall to a lesser reduction.


Alan.

[777]

There was a suggestion by some commentator on the radio this morning that this would push up longer term rates.

For what it worth most, if not all, major banks have dropped their retail 5 yr rate down to 6.2% or 6.0% from 6.75% over the past week or so. National and ANZ doing theirs today.

[Alan3285]

There was a suggestion by some commentator on the radio this morning that this would push up longer term rates.

For what it worth most, if not all, major banks have dropped their retail 5 yr rate down to 6.2% or 6.0% from 6.75% over the past week or so. National and ANZ doing theirs today.

Yes - which is why I am thinking that we might see falling rates, even though the effect of the earthquake is to lift rates. The global economy is a stronger wind than the Canterbury current.

Alan.

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“The big reaction has been in the bond market, where we’ve seen quite a big sell-off,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The main concern is the impact on the government’s finances in terms of funding the reconstruction cost.”


http://www.bloomberg.com/news/2010-0...anup-bill.html

[Alan3285]

“The big reaction has been in the bond market, where we’ve seen quite a big sell-off,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The main concern is the impact on the government’s finances in terms of funding the reconstruction cost.”


http://www.bloomberg.com/news/2010-0...anup-bill.html

Expected, but may be wrong in that I read somewhere else (and cannot now find it), that EQC said they do not expect to be liquidating any significant number of bonds.

That could be just them talking things up so as to get a better price of course!

Alan.

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yeh its what I expected but not what you said

which is why I am thinking that we might see falling rates

update from the PM via interest.co.nz

"Key said the Earthquake Commission expected not to have to liquidate or sell government bonds to help pay for the reconstruction costs of the Christchurch Earthquake. Some had feared a mass sale of government bonds by the Commission would push up market interest rates, which may in turn have pushed up mortgage and deposit rates."

[Alan3285]

yeh its what I expected but not what you said


update from the PM via interest.co.nz

"Key said the Earthquake Commission expected not to have to liquidate or sell government bonds to help pay for the reconstruction costs of the Christchurch Earthquake. Some had feared a mass sale of government bonds by the Commission would push up market interest rates, which may in turn have pushed up mortgage and deposit rates."

Which?

They could be talking up the market ahead of some softly softly liquidations 'in the normal course of business'.

Unless EQC is sitting on hundred of millions in cash, they will have to be liquidating something? Could they be sitting on that much cash?

Alan.

[Dubdee]

2009 balance sheet showed 3.7 bn in bonds and 1.6 bn in global equities. little cash. But it might be a bit like Tower in that they have glbal reinsurance for a good part of the risk, and remember risk is capped at 100K per property