NZGBS: Westpac: NZGB-30 Syndication Pricing Should Be Straight Forward

Westpac suggest that “pricing the new 2030 nominal NZGB, which is expected to be issued via syndication in March, should be straight forward, given it’s an intermediate line and the curve there is quite flat.”

• “Our usual range of methods indicates the theoretical fair yield is 1bp below the 2029 yield, excluding any new issuance premium or discount, so 4.62%.”
• “The 2030’s closest neighbours will be the 2029 and 2031 bonds. A NZGB 2030 yield of 4.62% would be 81bp above the equivalent maturity-interpolated ACGB yield and 60bp above the U.S. Tsy yield.”
• “The impact on the two main NZ bond benchmarks is likely to be small. If NZ$4.0bn is issued via this syndication (our estimate based on achieving the year’s target of NZ$28bn and maintaining the weekly tender pace of NZ$400m), the S&P/NZX benchmark's duration, currently around 5.6 years, should increase by 0.2 years. The Bloomberg Composite, currently 4.3 years, should increase by 0.1 years. Note that the maturity of the 15 April 2023 bond, with NZ$16bn outstanding (of which NZ$8bn is held by the RBNZ as LSAPs), will increase these two benchmarks by 0.6 years and 0.4 years.”