1. Open and read the Investment Statement For NZ Government Bonds. This document contains important information about Government Bonds that will help you to understand whether an investment in Government Bonds is right for you.
2. Decide how much you would like to invest and the specific Government Bond to invest in to. If you'd like to talk it through just contact the ASB Securities Fixed Interest Service.
3. Phone 0800 272 732, option 4 for the Fixed Interest Service or speak with your advisor directly, and place your order. You will need to be an ASB Securities client to invest.
We'll take care of the rest.
If you'd like to discuss the options with someone, feel free to call one of our fixed interest team on free phone 0800 272 732 (option 4).
Do I have to be an ASB Securities client to invest in Government Bonds?
Yes. As Government Bonds are transacted in the secondary market you need to have a sharetrading account with us. Becoming a client also enables us to monitor your investments, contact you about maturities regarding your chosen investment as well as other new investment opportunities that are available from time to time.
Fixed Interest Rates ・ Fixed Interest brokerage is charged at 0.7% of the capital value of the transaction or a minimum of $NZ35.00. ・ Reduced brokerage rates are offered on transactions worth NZ $50,000.00 or more.
Government Bonds NZ Government Bonds are wholesale fixed-term debt securities issued by the Crown to registered bidders in periodic government bond tenders. Government bonds have an initial maturity of one year or more. ViewCurrent Maturities Available for Government Bonds.
Government Bonds are issued in the wholesale primary market to registered bidders (like banks). Retail investors can buy and sell Government Bonds in the secondary market via a share broker or a bank. ASB Securities trades Government Bonds on behalf of clients.
Government Bonds are rated AA+ by Moody's. However, the price of a Government Bond is determined by the market and can rise or fall. The change in price is largely determined by changes to interest rates. As interest rates rise, the value of the bond will decrease, and as interest rates fall, the value of the bond will increase.
What this means is that for every $1 face value of Government Bonds, you may pay more or less than $1 when buying, and receive more or less than $1 when selling. If you hold the bonds until maturity, you will receive $1 face value.
What Fees will I pay when investing in Government Bonds? As Government Bonds are purchased and sold in the secondary market, a brokerage fee is charged. Our Fixed Interest Fees show the current brokerage rates for ASB Securities. This fee is incurred on both purchases and sales, although if you hold your bonds until maturity you will only incur brokerage on the purchase.
There are no other fees charged on NZ Government Bonds.
Kiwi Bonds Kiwi Bonds are similar to a term deposit in that they offer a fixed rate of interest over a given timeframe, either six months, one year, two years or four years. The minimum investment amount is $1,000. The maximum investment is $500,000.
The interest rates offered are usually lower than those offered by banks because of the greater level of security associated with a government investment (AAA credit rating by Moody's). The interest rates are set periodically by the Treasurer of the New Zealand Debt Management Office, based on the moving averages of domestic wholesale interest rates (i.e., interest rates for government bonds and Treasury bills).
Current interest rates for Kiwi Bonds (last updated 06 September 2011):
Term Interest Rate Six Months 2.00% pa One Year 2.00% pa Two Years 2.25% pa Four Years 2.75% pa
Kiwi Bonds are available only to New Zealand residents. Anyone resident outside New Zealand, even if they hold New Zealand citizenship, is ineligible to invest in Kiwi Bonds. This is due to the requirements of securities regulations in offshore jurisdictions.
What Fees will I pay when investing in Kiwi Bonds?
There are no fees payable to invest in NZ Government Kiwi Bonds. ASB Securities will receive a commission from the Government for our role in facilitating the investment in Kiwi Bonds. For more information please refer to the ASB Securities Advisor Disclosure Document.
NZ Government Securities The NZ Government regularly issues bonds to raise money. As an investor, you may consider adding this low risk investment to your portfolio. With NZ Government Securities:
1. Interest is paid out regularly and the original principal investment (face value) is repaid entirely on maturity. 2. The Government has never defaulted on its debt obligations and although this is not guaranteed, it's unlikely to default in the future. 3. Government Securities carry a Standard and Poor's AAA credit rating, the strongest rating possible.
There are two types of Government Securities that retail investors can purchase. 1. Kiwi Bonds suitable for investors with a short to medium time-frame for investment (six months to four years). 2. Government Bonds suitable for investors with a longer time-frame for investment (greater than two years).
Reserve Bank governor Graeme Wheeler lifted the official cash rate for the second time in as many months, saying non-tradable inflationary pressures were "becoming apparent" in an economy that's picking up pace and he's watching the impact of a strong kiwi dollar on import prices.
"Spare capacity is being absorbed and inflationary pressures are becoming apparent, especially in construction and other non-tradable sectors," Wheeler said in a statement.
He lifted the OCR 25 basis points to 3 percent, saying interest rates need to be at a level where they don't add to demand so as to keep inflation expectations contained.
"The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures, including the extent to which the high exchange rate leads to lower inflationary pressure," he said.
The kiwi dollar climbed to 86.06 US cents from 85.80 cents immediately before the statement was released. The trade-weighted index gained to 80.11 from 79.87.
Government figures last week showed inflation was 0.5 percent in the first three months of the year, missing estimates of 0.7 percent, with the headline number dragged down by a strong currency reducing the price of imported goods and services. Non-tradable inflation rose at an annual pace of 3 percent in the period, underpinned by rising housing-related costs.
Wheeler said the strong kiwi dollar was still a headwind to the tradable sector, and that "the bank does not believe the current level of the exchange rate is sustainable."
Slower-than-expected first-quarter inflation and a recent drop in dairy prices had fuelled speculation the Reserve Bank may tone down its rhetoric in today's statement in an indication the pace of interest rate increases may slow, and markets pulled back their expectations, pricing in 112 basis points of hikes before today's announcement, down from as much as 122 basis points in March, according to the Overnight Index Swap curve.
Wheeler today lifted his expectation for gross domestic product growth in the year ended March 31 by 0.2 of a percentage point to 3.5 percent compared to last month's monetary policy statement, saying "economic expansion has considerable momentum."
Export commodity prices are still "very high" even after the recent slump in dairy prices, and the extended period of low interest rates, increased activity in construction, and rising inbound migration as supporting the economic recovery, he said.
Last month the central bank raised its forecast track for the 90-day bank bill rate, seen as a proxy for the OCR, by about 20 basis points from the June quarter this year, and sees the rate rising to 4 percent by the end of 2014 and 5.3 percent by March 2017. It had previously seen the rate increasing to 3.8 percent by the end of 2014, and 4.8 percent by March 2016.
"In our view, concern over the speed and magnitude of dairy price falls and discomfort with the strong NZD's decoupling from commodity prices would indicate the RBNZ is far from committed to lifting the OCR in June," ASB chief economist Nick Tuffley said in his OCR preview last week.
The governor kicked off the tightening cycle last month when he raised the benchmark rate for the first time since 2010, citing building inflationary pressures as economic growth gathers momentum. He had held off raising interest rates until March to avoid increasing the lure of the New Zealand dollar, which has been at elevated levels since central banks around the world slashed interest rates near zero in response to the global financial crisis.
Homeowners brace for new rates hike ASB bank chief economist Nick Tuffley told Radio New Zealand that homeowners should brace for further rises.
"We have seen inflation creep up from 1 per cent, which was a pretty low figure, but the key thing for the Reserve Bank is that because interest rates take up to a couple of years to actually impact fully on inflation, they do have to look ahead.
"What they're looking ahead at is an economy which is picking up a bit of steam.''
Inflation would begin to creep upwards unless interest rates were brought back to a more manageable level, he said.
If the Reserve Bank waited for inflation to reach 2 per cent, it would be too late, Mr Tuffley said.
"It's about trying to get the balance right, and what we're expecting from the Reserve Bank is, over the space of this year and next year, interest rates going up around about two percentage points.''
The rise eventually would bring floating mortgage rates from multi-decade record lows up to around 7.5 to 7.75 per cent, Mr Tuffley said.
Mortgage rates are around just under 6 per cent at present.
The Reserve Bank last month said the rapid increase in net migration over the past 18 months, which has boosted demand for housing and consumer spending, was an inflationary pressure which prompted it to lift the official cash rate a quarter-point to 2.75 percent.
The last time the OCR was at 3 per cent was in January 2011. Based on Mr Wheeler's projections in the March monetary policy statement he will increase the OCR by a total two percentage points in the next two years.
China’s first onshore bond default has highlighted the fact that the juggernaut economy is not immune to the dangers that crippled the western world’s financial system and perhaps accentuated that the risk could be greater in China due to its reliance on excessive credit growth, fuelled by an unregulated shadow banking sector.
そしてやっぱりヘッジ文言 The comments in this publication are for general information purposes only. This publication is not intended to constitute investment advice under the Securities Markets Act 1988. This publication has been prepared in good faith based on information obtained from sources that are believed to be reliable and accurate. However, that information has not been independently verified or investigated by Bancorp Wealth Management. Accordingly, Bancorp Wealth Management: (a) does not make any representation or warranty (express or implied) that the information is accurate, complete or current; and (b) excludes and disclaims (to the maximum extent permitted by law) any liability for any loss which may be incurred by any person as a result of that information being inaccurate or incomplete in any way or for any reason. The information, analyses and recommendations contained in this publication are confidential to the intended recipients and are statements of opinion only. They have been prepared for general information purposes and whilst every care has been taken in their preparation, no warranty or representation is given (express or implied) as to their accuracy or completeness. Nothing in this publication should be construed as a solicitation to buy or sell any security or other product, or to engage in or refrain from doing so or engaging in any other transaction. This publication should not be used as a substitute for specific advice. This publication is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs, and therefore prior to acting on any information, analysis or recommendation contained in this publication, you should seek advice from your usual Investment Advisor. Bancorp Wealth Management and its related companies (and their respective officers, agents and employees) will not be liable for any loss whatsoever suffered by any person relying upon any such information, analysis or recommendation. This publication is not intended to be distributed or made available to any person in any jurisdiction where doing so would constitute a breach of any applicable laws or regulations. ＊＊＊＊＊
Economic Overview and Commentary Federal Reserve (“Fed”) Chair Janet Yellen announced a change in forward guidance at the 19 March FOMC, dropping a pledge explicitly linking interest rates to a 6.5% unemployment threshold – fast approaching at 6.7% in March - and broadening it to include a range of measures to assess capacity in the labour market. Far from being a move to delay tightening however, the Fed said it is comfortable with the economic recovery efforts, attributing the January/February weakness to the unseasonably cold weather and expects the drag to “wash out” in the June quarter, and has upwardly revised its interest rate track. Following the FOMC, the US March non-farm payrolls report was underwhelming, not delivering the post-winter rebound that had been expected. That said the labour market does appear to be healing, albeit at a glacial pace, and growth is materialising in the broader economy. All in all, it should keep the Fed’s outlined tapering path on track (touted finish line of early 2015).
New concerns have emerged about the ability of the Chinese government to rein in credit growth. China’s first onshore bond default has highlighted the fact that the juggernaut economy is not immune to the dangers that crippled the western world’s financial system and perhaps accentuated that the risk could be greater in China due to its reliance on excessive credit growth, fuelled by an unregulated shadow banking sector.
The European Central Bank (“ECB”) again refrained from easing monetary policy settings at its 3 April policy review, even after a flash estimate for March showed annual inflation fell to 0.5% - the lowest level since November 2009. ECB President said that the committee is supportive of using “unconventional instruments (read quantitative easing)”. Critics of Draghi's passive response have said that the ECB is blind to an economy stuck in a slumber and is being remiss in ignoring the risk of deflation, in turn aggravating debt problems and smothering business confidence and capital spending.
The Reserve Bank of New Zealand (“RBNZ”) finally started its rate hike cycle, lifting the official cash rate (“OCR”) 25 basis points to 2.75%. The central bank said that inflationary pressures are increasing and expected to rise, and while recent data suggests the housing market is coming off with the effect of the LVR restrictions, net migration is expected to more than offset this. A string of 25 basis point hikes are expected in April, July and October with the RBNZ keen to frontload its normalisation track. The RBNZ anticipates that “the OCR will need to rise by about 2 percentage points over the next two years.”
Currency Review The unresolved situation in the Ukraine has kept an air of caution to markets, helping to support safe-haven currencies, notably the USD and CHF, and weighing on risky currencies such as the NZD and AUD. The USD is expected to strengthen further as data feeds in showing a more consistent US economic recovery.
Recent weakness in the NZD – augmented by dairy prices easing – has reignited talk of an ‘overvalued NZD’ (the NZD Trade Weighted Index has been at all-time highs). We don’t see a substantially lower NZD/USD, not at the moment, especially when one is reminded that the RBNZ intends to hike again at the end of the month while most other developed economies are simply looking to consolidate recovery efforts. That said, major moves higher by the NZD could be limited if the medium term economic outlook for other economies continues to slowly improve, and if indeed soft commodity prices have peaked.
At the 3 April policy review ECB President Mario Draghi resorted to his preferred method of using rhetoric to indirectly provide stimulus (with an expectation presumably of a lower currency). Unfortunately for Draghi the market was distracted by the impending US March non-farm payrolls report, and so the EUR only managed a modest dip. Worries about the region’s growth and inflation, and ongoing tensions in the Ukraine have helped the EUR ease lower however the EUR/USD’s eighteen month long uptrend remains intact (still surprising to us). With little economic fundamentals to support it, the plight of the JPY is dependent on external factors, namely the US economy and the Ukraine situation. Improved risk sentiment will see reduced safe-haven buying, which will subsequently open up further JPY depreciation. An expected increase in the sales tax from 5% to 8% and another rate hike at the 26 April RBNZ OCR review could see a push through NZD/JPY90.00.
Fixed Income – Bond Market Analysis With the US inflation outlook still benign, the Fed’s more aggressive interest rate track saw investors adjust their position on the curve to increase duration, picking up the longer dated 30 year bond. The benchmark 10 year Treasury yield got as high as 2.80% but is still comfortably trading in the 2.50%/3.00% range, which we expect to hold for some time yet - demand for safe haven assets is capping the topside while the Fed’s gradual unwinding of its quantitative easing is limiting falls.
The New Zealand yield curve is steep at the short-end, with the RBNZ keen to frontload its normalisation track. Further out however the curve continues to flatten, held down by the US long-end, but also market perception that the aggressive nature of the hiking cycle will be successful in containing future inflationary pressures.
そしてヘッジ文言 The comments in this publication are for general information purposes only. This publication is not intended to constitute investment advice under the Securities Markets Act 1988. This publication has been prepared in good faith based on information obtained from sources that are believed to be reliable and accurate. However, that information has not been independently verified or investigated by Bancorp Wealth Management. Accordingly, Bancorp Wealth Management: (a) does not make any representation or warranty (express or implied) that the information is accurate, complete or current; and (b) excludes and disclaims (to the maximum extent permitted by law) any liability for any loss which may be incurred by any person as a result of that information being inaccurate or incomplete in any way or for any reason. The information, analyses and recommendations contained in this publication are confidential to the intended recipients and are statements of opinion only. They have been prepared for general information purposes and whilst every care has been taken in their preparation, no warranty or representation is given (express or implied) as to their accuracy or completeness. Nothing in this publication should be construed as a solicitation to buy or sell any security or other product, or to engage in or refrain from doing so or engaging in any other transaction. This publication should not be used as a substitute for specific advice. This publication is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs, and therefore prior to acting on any information, analysis or recommendation contained in this publication, you should seek advice from your usual Investment Advisor. Bancorp Wealth Management and its related companies (and their respective officers, agents and employees) will not be liable for any loss whatsoever suffered by any person relying upon any such information, analysis or recommendation. This publication is not intended to be distributed or made available to any person in any jurisdiction where doing so would constitute a breach of any applicable laws or regulations. ＊＊＊＊＊
