Interesting time coming shortly for this bond. Next annual reset due 15 November. Mechanism for reset is margin of 1.5% over 1 yr swap. By my calculation the current efective interest rate is 7.7% on paid interest rate 5.26%. For this bond to return 7.7% after next reset a dramatic adjustment would be required to the buy/sell price on NZDX. If I have got my calculations right these are the scenarios.
If OCR stays at 2.75% and current 1 yr swap 2.7% then interest rate will be 4.2%. The market price on the bond would have to be 55 per 100.
If the OCR goes to 2.5% - assuming 1 yr swap is 2.45% interest rate becomes 3.95% and market price would be 52 per 100.
These calulations done purely for estimating maintaining the current effective interest rate when next reset comes into play. Anybody see it any differently.