Big overseas bid in stock tender?

Press, 25 January 1986, Page 22

Big overseas bid in stock tender?

By

MARTIN FREETH,

in Wellington

The results of the latest Government stock tender indicate that a merchant bank picked SIOOM in the longest-dated, elght-year stock with a bld of 18.7 per cent. The identity of the successful bidder is unknown but money market dealers suggested the size and level of the bld indicated that it was backed by an overseas investor. Overseas interest is understood to have been higher in this tender than in the December one because the kiwi dollar has not strengthened over the last month to a level in line with a firming trend in interest rates. The tender results were as generally expected by dealers. Some were critical of a delay of about 20 minutes by the Reserve Bank in releasing the results, keenly awaited at noon. No warning of the delay was given to the market and trading apparently came to a standstill while dealers waited. Dealers said the change, in the composition of different dated stocks in the tender was a step not taken in any other tender since the change in Government in 1984. The initially announced offering of SISOM in September 1989 stock was

reduced to SIOOM in the results. The average rate of 19.96 per cent compares with a December tender result for the same stock of 17.36 per cent The total of competitive bids for each of the longer-dated 1991 and 1994 stocks was much higher. The amount of 1991 stock sold was SIBOM, not SISOM as announced before and, of the 1994 stock, SI2OM was sold, not SIOOM. The bidding range on 1991 stock was 19.25 to 19.53, producing a weighted average of 19.42 per cent (16.69 on the same stock in December). A range of 18.71 to 18.78 was big on the 1994 stock, with the average at 18.75. The Minister of Finance, Mr Douglas, said the Government had used its “over-subscription facility” to limit the cost of servicing the public debt. Altering the composition of the tender has meant that more of the S4OOM has been raised at slightly lower rates. The rates have risen back towards the level they were in tenders before the November one. There was an expectation in the money market

yesterday that stock rates at tender and on the secondary market would continue to be under pressure until the end of the tax drain in March. Mr Douglas said the rates on Kiwi Bonds, the new retail instrument introduced late last year, will be increased in line with the tender results. The existing issue of the bonds closed yesterday and a new one opens next Thursday with rates of 19.5 per cent for two years and 18.5 per cent for four years. '