Rates jump sharply at latest stock tender

Press, 13 December 1986, Page 29

Rates jump sharply at latest stock tender

PA Wellington The Government has had to pay high prices to fill its monthly $5OO million stock tender, results of which were released yesterday. Bidding was extremely light and rates ' rose accordingly, especially for the shorter-term, 15month stock which was well under-subscribed with rates stretching up to 21 per cent. This was the third sue-

cessive tender at which rates have risen and it will give rise to further reviews of increasing mortgages and other retail long-term lending in the new year. The last three tenders have reversed the falling trend seen in mid-year, and the higher rates will not be welcomed by borrowers or by the Government. The rates were well above those set at the last

tender a month ago and were slightly above rates set earlier this week on the secondary money market.

gages. This was the last scheduled tender of the current financial year as none are set for the first three months of 1987. However, the Government hinted this week that an extra tender may be needed early next year to help fund the increased Budget deficit, and dealers said that this had contributed to yesterday’s higher rates.

The 15-month maturity attracted only $114.1M of bids for the SISOM on offer. As a result the Reserve Bank accepted all the 15month bids, with a top rate of 21 per cent. It made up the shortfall by accepting extra bids at the two longer maturities, raising their average yields along the way. The average yield on the under-subscribed 15month stock was 2.6 'percentage points above rates set at the last tender.

Banks took the bulk of the latest SSOOM stock tender. Stockbrokers took only S4SM, an indication that there was. limited foreign-based bidding.

Merchant banks took $227M with 89 successful bids, followed by trading banks with SI2SM (29 bids) and savings banks S3SM (9 bids).

Benchmark five-year February, 1992, stock was up 1.06% on the last tender, averaging 17.45% (last month 16.39%). This compares unfavourably with the year’s low of 15.24% in June but is still below the year’s high of 19.8% paid in February. March, 1990, stock averaged 18.61% (last month 16.85%) while 15month February, 1988, stock averaged 19.61% (last month 17.01%. Dealers bid only S7I9M for the SSOOM on offer, a very low bid which was well down from the $1361M bid at the November tender, and which helped explain the high rates. Government stock tenders are held most months to help fund the the budget deficit and to repay previous borrowings. They usually set trends for other long-term lending, including mort-

Life insurance offices took S3OM (17 bids), Government organisations S27M (14 bids), others S6M (6 bids) and superannuation funds SSM (1 bid). Tender details:

February, 1988, stock: Offered, SISOM; bid, $114.1M; sold, $114.1M; successful yields, 18.7% to 21%; weighted average. Tender result:

19.613%; (previous average, 17.011%). March, 1990, stock: Offered, S2OOM; bid, 5220.6 M; sold, 5205.8 M; successful yields, 18.35% to 18.92%; weighted average, 18.608%; (previous average, 16.856%). February, 1992, stock: Offered, SISOM; bid, 5385.4 M; sold, 5179.9 M; successful yields, 17.37% to 17.55%; weighted average, 17.456%; (previous average, 16.393%). Recent trends for fiveyear stock are: Tender: June, 1985; ma-

turity, 3/91; yield, 18.153%; July, 3/91, 18.175%; Sept, 3/91, 19.591%; Oct, 10/91, 19.960%; Nov, 10/91, 17.783%; Dec, 10/91, 16.690% (defaulted); Jan, 86, 10/91, 19.421%; Jan, 10/91, 19.369% (retender); Feb, 6/91, 19.777%; April 3, 6/91, 19.697%; April 17, 6/91, 17.929%; May, 9/91, 15.706%; June, 9/91, 15.239%; July, 9/91, 16.636%; Aug, 9/91, 16.970%;. Sept, 2/92, 15.458%; Oct, 2/92, 15.631%; Nov, 2/92, 16.393%; Dec, 2/92, 17.456%.

Maturity 15/2/88 15/3/90 15/2/92 Amount 150M 200M 150M Coupon 14.0 14.0 14.0 Amount bid 114.IM 220.6M 385.4M Accepted 114.IM 205.8M 179.9M Rate range 18.70-21.0 18.35-18.92 17.37-17.55 Wght Avge 19.613 18.608 17.456 At top rate 99.9p.c. 27p.c. O.Olp.c.