Rates firm in latest Govt stock tender

Press, 25 January 1986, Page 3

Rates firm in latest Govt stock tender

By

MARTIN FREETH

in Wellington Interest rates have finned in the latest Government stock tender, adding strength to predictions that the Rakiura Holdings default last week will result in a cost of about $8 million for the Government. The tender results, released yesterday, show that the average rate accepted by the Reserve Bank on $lBO million of five-year stock was 19.42 per cent. That is 2.7 percentage points up on the 16.69 per cent rate set in the December tender by the successful bid of Rakiura Holdings, which then failed to settle. The $lOO million stock in that failure will be tendered again next Thursday, and money market dealers suggested yesterday that the rates then would probably be about those in the latest tender.

Extra cost will be put on the Government’s debt sales programme if the rates which the Reserve Bank has to accept next Thursday to raise the $lOO million are higher than those applying in the December tender. The bank took the unusual step yesterday of

changing the composition of the stock terms in the latest tender, to reduce the over all cost in raising the $4OO million sought. An average rate of 19.96 per cent was set to raise $lOO million in three-year stock, and one of 18.75 per cent was accepted for $l2O million of eight-year stock.

The Minister of Finance, Mr Douglas, said the rise in the rates between the December tender and the latest one was in line with a Government prediction that they would “fluctuate within an over-all downtrend."

Mr Douglas said the higher rates now resulted largely from heavy demand for funds generated by the annual March tax drain from the financial system. Dealers said the tender results yesterday were much in line with their expectations.

Further reports, page 22