$ ½ billion stock tender on Friday

Press, 24 July 1984, Page 30

$ ½ billion stock tender on Friday

By

PATRICIA HERBERT

in Wellington Labour will launch a SSOOM Government stock tender on Friday to mop up some of the funds that devaluation has brought back into the economy. The issue is the second biggest in New Zealand’s history, the largest, for $6OO million was offered by the outgoing National administration. The Prime Minister-elect, Mr Lange, announced the decision yesterday and said that he had asked Sir Robert Muldoon as Minister of Finance to put it into effect. Mr Lange said that the move would absorb some of the inflow of foreign exchange which had occurred since last Tuesday’s 20 per cent devaluation and that it was a step toward ensuring “that this did not provide a base for renewed monetary expansion and inflationary pressures.” Something of the kind was expected. The party’s spokesman on finance, Mr Roger Douglas, said that, when the devaluation pack-

age was announced the incoming Government would use the tendering system to restrain the money supply. A source in the market described the issue as timely and said that it would have been “very undesirable” if the “massive amounts of funds” which had flooded back into the country in the last week had been “left to slop around” because everything would have “gone crazy.” Labour has acted quickly. Not only has the tender come hard on the heels of the decision to devalue but also the. normal 28-day settlement period for Government stock has been cut back to 14 days so that payment is due on August 10. Four issues will be tendered: two conventional, and two index-linked. Under the first, to mature on May 15, 1987, $lOO million will be offered at 11 per cent. The interest rate on the second is 12 per cent and it matures on May 15, 1990. Again $lOO million will be offered. The amount offered in the two index-linked issues is

$l5O million; they will mature on December 15, 1987, or on December 15, 1991. Sir Robert was critical of the interest rates offered on the stock in a press statement released yesterday. He said that they underlined the cost burden the New Zealand taxpayer would have to face “as a result of the new Government’s unwise decision to devalue. “Cost will pile upon cost and it is the whole community who will bear the burden — apart from those who were wealthy enough to speculate. They have made millions,” Sir Robert said. Bids for the stock will close at noon on July 27. They must be lodged with Reserve Bank branches in Christchurch, Auckland, or Wellington, or posted to the bank’s head office. The bank also announced that, in addition to the tender, it and the Earthquake and War Damage Commission would invest $5 million in the May, 1990, ordinary stock, and $5 million in the December, 1987, indexed stock.