Treasury gets a tender result for an inflation-linked bond that returns a negative yield before the CPI component
by David ChastonTake a look at this NZ Government bond tender result, published by the Treasury Debt Management office at 2:05pm today (Thursday).
Results of Inflation-Indexed Bond Tender 738
| Series offered: | 2.50% 20 Sep 2040 |
| Total Amount Offered ($million): | 50 |
| Total Amount Allocated ($million): | 50 |
| Total Number of Bids Received: | 27 |
| Total Amount of Bids Received ($million): | 72.00 |
| Total Number of Successful Bids: | 22 |
| Highest Yield Accepted (%): | -0.0750 |
| Lowest Yield Accepted (%): | -0.1650 |
| Highest Yield Rejected (%): | -0.0550 |
| Lowest Yield Rejected (%): | -0.0725 |
| Weighted Average Accepted Yield (%): | -0.1032 |
| Weighted Average Rejected Yield (%): | -0.0634 |
| Amount Allotted at Highest Accepted Yield as Percentage of Amount Bid at that Yield*: | 100.0000 |
| Coverage Ratio: | 1.4400 |
*Individual allotments may vary due to rounding
This is an inflation indexed bond, so yields are as above "plus CPI" at the time the coupon is paid.
The coupon is 2.50%, so $250 for evey $10,000 of these bonds held. But investors paid much more than that so that over the 20 year term of the bond they will yield CPI inflation less 0.1032%.
Twenty seven parties bid $72 miln for the $50 mln on offer and 22 of these bidders "were successful".
This is another canary that says negative rates are upon us. Today's closing swap rates will be interesting to watch.