Government’s new offers boost interest rates

Press, 17 January 1986, Page 2

Government’s new offers boost interest rates

PA Wellington Longer-term money market interest rates firmed sharply again yesterday after the Government announced a larger than expected January stock tender, and added a February tender. The Reserve Bank said the January tender next week would be for $4OO million with three maturities — SISOM, September, 1989; SISOM, October 1991; and SIOOM, July 1994. Later, the Associate Minister of Finance, Mr Prebble, said a February tender would also be held because of an earlier decision to allow the Meat Board to finance the 1984-85 season losses from the Reserve Bank. This had created a liquidity injection that must be borrowed back if the Government’s monetary policy stance was to be maintained, he said. Details of the two tenders were announced at noon yesterday and the money market was quick to push up secondary market rates in the afternoon, on top of the solid rises earlier this week. The 1989 stock jumped from 19.1 per cent to 19.8 per cent. It sold at 17.4 per cent in the December tender. October, 1991, stock hit 19.4 per cent yesterday

afternoon, up from 18.7 per cent yester morning, 17.4 per cent a week ago and 16.7 per cent a month ago. The 1994 stock has not been offered before, but its quotes yesterday afternoon of 18.7 per cent were well above Wednesday’s 17.8 per cent quote for 1995

stock. Bids for the January tender will be taken on Thursday next week. At S4OOM the January tender is larger than other recent tenders, which have been for S3OOM, and it brings the Government borrowing for the financial

year to $2.7 billion (face value). Accouncing the February 13 tender, Mr Prebble said the size of the Meat Board’s deficit was now estimated as S3SOM. Mr Prebble also said that because of the proximity of the March tax flow, settlement for the January tender would finish on February 12 and for the February tender on March 3. Normally about a month is available for settlement, and about SI6SM of the December 12 tender had still to be settled yesterday.

The final date for that settlement is today and the Reserve Bank said yesterday it would probably offer SSOM of short-term securities for sale to help cover such a large flow from the private sector to State coffers.

The 90-day commercial bill rate continues to rise daily, hitting 23 per cent yesterday morning and 23.4 per cent yesterday afternoon.

Martin Freeth reports from Wellington that it is the second year of heavy losses by the Meat Board financed by the Reserve Bank.

Other injections that borrowing could be required to meet include the transfer of Dairy Industry Reserve Account funds to the private sector and greater than previously expected expenditure by Government departments.