New Zealand Government Debt News: New 30 Year Bond

First Labour. Now National. 30Y indentured servitude from the Uniparty.

L-R New Zealand Parliament (Beehive/Babel), Treasury, Reserve Bank. Image source.

I meant to write about this last month, but got distracted.

A ‘bond’ is debt.

Governments sell these bonds to pay themselves today.

Tax cattle (“four legs good, two legs BETTER”) pay for this debt over the duration of the bond. The problem, and the trap, is your retirement income is dependent on this debt; either

1. the currency raised from the bond sale pays the state pension today, or

2. the repayment of this debt by tax cattle, over time, pays a private pension - e.g. Kiwisaver schemes - who buy this debt for an income stream.

And because this debt has interest attached.
The debt must always grow.
It’s mathematically guaranteed.

First Labour, now National, have got in on the 30Y bond act. These are new.

Previously the longest duration bond was 20Y, which is bad enough.

A child born today will still be paying for this debt when they're 29. Your M.P. will spend it today.

Is there doubt it’s a Uniparty? Run by the Treasury and Reserve Bank technocrats. Bankers.

Press releases (20 and 21 Feb. 2024) from the Treasury (1)(2) (emphasis mine):¹

(1)…expects to issue at least NZ$2.0 billion of the 15 May 2054 nominal bond and the transaction will be capped at NZ$4.0 billion. Initial price guidance is -1 to +6 basis points over the 15 May 2051 nominal bond.

(2)…NZ$4.0 billion of the nominal 15 May 2054 New Zealand Government Bond has been issued via syndication…coupon of 5.00%, were issued at a spread of 1 basis point over the 15 May 2051 nominal bond, at a yield to maturity of 5.0925%. Total book size, at final price guidance, exceeded NZ$19.1 billion.

In essence this means Treasury sold $4B of these bonds - you can see the identities of the purchasing banks (called primary dealers) in (1). Over the 30 year duration of the bond the New Zealand tax cattle will have repaid $19.1B. Good deal?

I suspect some of these will turn up on the RBNZ balance sheet at sometime in the future. Because who else will buy this junk? And the RBNZ is the lender of last resort. It will create ‘money’² out of thin air to purchase these bonds. We’ll see.

Feel free to ask any questions but for definitions etc. have a look at Investopedia first.

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1. Labour’s 30Y bond is the “15 May 2051” one mentioned.

2. It’s not money. It’s fiat currency, has zero value, and is created using debt.

See also