Govt to pay record interest

Press, 3 October 1979, Page 6

Govt to pay record interest

I PA Wellington The Government has announced new higher rates on its latest stock issue. The yields offered are at record levels, given their gilt-edged Governmentguaranteed status. But the increase — half a per cent on shorter maturities up to three years — is not particularlv large, given the recent big jurn-'s in competing interest i .as available elsewhere. Explaining the reasons for the higher rates, the Acting Minister of Finance, (Mr Templeton) said last evening that pressure could not be eased at present because of the growth in the money supply. Shorter-term rates had been increased in line with competing rates. The increased rates are all for shorter terms. The 10year term has been discarded in favour of a new six-year offering. The biggest rises are ini very short-term stock. Rates! for Treasury bills —- a fac-1 jility used largely by trading banks requiring a minimum investment of $lO,OOO —| have been increased sharply.! The new 13-week bills will I be sold to yield 11.25 per cent (previouslv 10.6 per cent), and the 26-week Treasury bill yield will be 11.5 per cent (previously 11 per cent). The new one-year stock will offer 11.5 per cent (previously 11 per cent) and should prove popular with small investors with a minimum of $lOO to invest, as well as with institutions. Other increased rates are two years at 12 per cent (previously 11.5) and three years at 12.5 per cent (12). A new six-year offering at , 13 per cent replaces the previous five-year and 10-year terms. The five-year term ■ had been at 13 per cent, and 1 10 years at 10 per cent. !

The 13-week. Treasury bill yield at 11.25 per cent compares with 14.8 per cent available on the unofficial money market, or 14.75 per cent for the same period from a trading bank. The one-year Government stock rate at 11.5 per cent will have to compete with 14 per cent debenture offerings from Broadlands, General Finance or U.D.C.; the three-year term at 12.5 per cent is 2 per cent below debenture and mortgage rates. But significantly it is a full 2.5 per cent higher than monev invested with the National Provident Fund, and half a per cent more than being offered bv permanent building societies.

I The loan will be open from i (October 8 to 19, and will I, ‘have November maturities 11 and be issued on November i Mr Templeton said thei' j stock maturing in six years j ( 'had been introduced for* l : debt-management reasons i 1 in “recognition of inves-p tor preferences.” ‘i