Transcript: Interview with New Zealand Treasury Debt Management Chief Kim Martin

21 July 2025

By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 18 July 2025 with Kim Martin, Chief of New Zealand Debt Management of the Treasury.

Q: Ms Martin, your May 2031 syndicate tap in early July was well bid with over NZ$31.3bn worth of bids. It exceeded the $23.95bn worth of bids for the October 2024 tap. It was also very well covered at 5.2x and priced at +21bps which was the lower end of guidance. Were you surprised at the success of this tap?

A: We were very pleased with the strong demand this deal attracted from a broad range of investor types and locations. This allowed us to issue the maximum volume we were prepared to – NZ$6 billion – at the left-hand side of the initial price guidance.

This was the largest ever book for a NZGB deal. Conditions aligned for the timing of this particular transaction; the 2031 was one of the steeper parts of the NZGB curve, it had a wide asset-swap spread, and our bonds were also attractive relative to both ACGBs and US Treasuries on an outright and a hedged basis. This part of the curve also appeals to most investor types, including domestic bank balance sheets and offshore asset managers.

Q: Non-residents took 70% of this tap vs their current 61.9% holdings of NZGBs. Was this a surprise?

A: It is usual that the allocation to non-residents in syndications differs to the proportion of NZGBs held by non-residents. However, the proportion of non-resident investors in this deal was a little higher than we would usually expect for a 6-year bond.  Generally, we find that short-dated bonds attract greater interest from domestic accounts, including bank balance sheets while long-dated bonds have greater participation from offshore accounts. That said, over the past few years, we have seen interest from offshore investors in all parts of the curve, and the proportion of syndications allocated to non-residents has varied from around 25% to over 80%.

Q: Non-resident bond holdings of NZGB’s rose to 61.9% in May from 61.6% in April. Are you happy with the level of foreign holdings in NZGBs? Is there a point where too many NZGBs are held by offshore accounts?

A: Over the past decade, or so, non-resident holdings of NZGBs have ranged between about 50 and 70%. We don’t target a particular level but aim for as much diversity in our investor base as possible. We value diversity in investor type, investment mandate and geographic location. We work hard to keep our offshore investors, and potential investors, well informed and recognise there will also be solid demand for NZGBs from domestic fund managers and bank balance sheets.

Q: You expect two more syndicate taps of existing NZGB lines in 2025/26, last year’s pattern was Q1, Q2 and Q3 of the fiscal year. Is it reasonable to expect the same timings this year?    

A: We aim to provide investors with as much transparency as possible about our upcoming plans while maintaining flexibility to respond to market conditions. Last year’s pattern is not necessary a guide. However, as we narrow down windows for execution, we will communicate this to the market.

Q: The inaugural Green Bond issued in November 2022 has been tendered regularly since February 2023. How much longer do you plan to continue those tenders?

A: In most respects we approach our green bond with the same funding strategy as our other nominal bonds i.e. we anticipate issuing into the bond throughout its life cycle and it can be expected to be offered for tender periodically. That said, green bond issuance is unique in its requirement to be underpinned by an eligible expenditure pool. Currently we have NZ$9.6 billion of green bonds on issue and NZ$15 billion in our eligible expenditure pool. This will determine the rate of tender issuance in the near-term. We anticipate the eligible expenditure pool will continue to grow with each annual Budget.

Q: Are you planning to introduce a new green bond maturity in the near future?

A: For now, we intend to focus issuance into our existing 2034 maturity in order to maximise liquidity in this green bond.

Q: You announced a new 2050 inflation-indexed bond earlier this year but haven’t yet issued it. Is that still on the table for H2, or is 2026 more likely?

A: At Budget 2025, on 22 May, alongside providing an update on our borrowing programme, we announced our intention to syndicate a new 2050 IIB in this fiscal year i.e. before 30 June 2026. As mentioned above, we will communicate to the market when we have narrowed down the window for this syndication.

Q: What is your longer-term strategy for Inflation-Indexed bonds? Some sovereign issuers, like Germany, have exited this market. Are you heading in the same direction or leaning in further?

A: We have had a number of questions from global investors about linkers, especially since Canada and Germany have recently stopped issuing them. We’ve made it clear that linkers remain part of our funding mix as a useful diversification tool.

The product is inherently attractive to investors with long-term inflation-linked liabilities. The current linker curve only goes out about 15 years, so it’s a good time to consider extending. It’s still a small subset of our overall issuance, but it has a role to play. As the retirement product market in New Zealand becomes more mature, demand for annuity-style structures may emerge – linkers are well suited for this.

Q: Why has the EMTN programme remained inactive since 2004? Do you see any reason that could change in the near term?

A: We review our funding strategy on an ongoing basis. Since 2004, we have not seen compelling reasons to diversify beyond our NZD programme for long-dated issuance. We prefer to maximise liquidity and focus on this product. However, since 2020 we have maintained short-dated foreign currency issuance via our ECP programme.

Q: Would you consider issuing in euros or other currencies if pricing became more favourable? Given that a large number of NZGBs are held by Australian investors would you ever consider issuing in Australian dollars?

A: Pricing is only one variable for us to consider. We have a strategic, rather than tactical approach to issuance, so a range of factors would need to align before we issued in other currencies. We have found many of our Australian investors appreciate the diversification into New Zealand dollars.

Q: Do you anticipate raising your USD commercial paper issuance beyond the current NZ$3 billion soft target?

A: US$3 billion is our guidance on the minimum ECP issuance that we will maintain, rather than a target. Over the past year, ECP on issue has ranged between NZ$9.3 - $14.5 billion (US$5.7 - 8.2 billion). We will continue to utilise the flexibility of this product to address fluctuations in short-term cash needs.

Q: Will the RBNZ continue to sell you back NZGBs under the current active RBNZ QT programme?

A: The RBNZ has indicated it will sell back NZGBs held under its Large Scale Asset Purchase programme at a rate of NZ$5 billion per year, in addition to bonds that mature naturally. These bonds are sold directly to NZDM. On this basis, the RBNZ will have sold all the bonds, held under the LSAP programme, by mid-2027. These purchases are already factored into the sovereign borrowing programme.

Q: A number of sovereigns are looking to issue in shorter length maturities given the ructions in the long end of the curves. Is the NZDM also considering this?

A: We have not made any structural changes to our funding strategy. The average weighted maturity of our portfolio remains around 7.5 years. However, we have been making good use of flexibility built into our issuance approach. While we pre-announce a weekly issuance range at the start of the month, we refine which bonds we will offer in the days ahead of each tender. This year there have been weeks in which we have chosen not to offer a long bond and instead issued only two shorter-dated bonds, rather than three bond lines. As a result, our weighted average issuance in this calendar year has been shorter than in recent history.

Q: If there was to be more T bill issuance, what plans do you have to get more successful auctions given that a number of T bill auctions do not sell, i.e. the NZDM does not accept any of the bids?

A: We maintain a minimum of NZ$3 billion of T-Bills on issue and flex issue above this, as required by short-term cash needs, and in reference to relative pricing with ECP issuance. Over the past year, T-Bills on issue have been sitting between NZ$4-6 billion so we have been judicious and price sensitive when accepting bids at weekly auctions. We do not anticipate this approach changing.