Bank of New Zealand (AA/Aa2) (BNZ) says domestic demand for bank paper is holding up in the wake of a self-led NZ$60 million (US$42.29 million) increase to its 2011 line, which priced at 90 basis points over three-month mid-rate swap on August 25.

Patrick Mullins, head of capital markets origination at BNZ in Auckland, says the transaction was placed entirely domestically, as was the NZ$130 million increase to the bank’s 2013 which priced at 125 basis points over swap on August 22. “We launched the 2013 trade at NZ$50 million, and would have been happy to price that amount,” Mullins comments. “Increasing to NZ$130 million close to the pricing of two other deals indicates that even though there has been a lot of bank supply recently it has been getting swallowed up, and there is still demand out there.”

BNZ also priced NZ$100 million of 2015 paper on August 13 in a deal which saw 25 per cent retail participation. While the retail contribution to the 2011 deal was smaller at under 10 per cent, around half the book for the 2013 deal was retail and Mullins says it is those buyers who are driving longer-dated transactions.

“Given the recent news from the Reserve Bank on interest rates with expectations of further cuts to come, retail investors in particular are keen to invest further along the curve to lock in higher rates,” he explains. “Instos are still showing a preference for shorter-dated deals, though, so while we have been able to do nearly NZ$300 million in a short space of time, bringing a single deal of that size is still not an easy proposition.”

For that reason the issuer is focusing on adding liquidity to existing lines, Mullins says. BNZ’s 2011 line now has a total of NZ$170 million outstanding, its 2013 NZ$380 million and the 2015 NZ$180 million.