JONES We have had appetite to lengthen the duration of the funding portfolio, in line with the assets on the Crown’s balance sheet, for several years. However, we are also conscious that in doing this we must get the right mix between outstanding bond volume, available capacity and overall liquidity in each line given the total funding requirement of the Crown.

Earlier in the 2016/17 fiscal year we extended the nominal bond curve by six years, issuing the longest bond in the New Zealand Debt Management Office (NZDMO)’s history – the April 2037 nominal bond. In the near term, our focus is on building liquidity in this line through regular tendered issuance.

BUSH We were very pleased to see the AOFM successfully issue a 30-year bond and we have also been seeing demand for longer-dated issuance from on- and offshore investors. We have undertaken some private placements offshore that have met what I would describe as our natural demand for longer-dated funding at this point.

If we found the need for larger volume of 30-year funding it is certainly something we would explore. It is fair to say the 30- year space is something we are watching with interest rather than actively pursuing given we have been able to satisfy demand for QTC paper via private placements to date.

TRIGONA New South Wales Treasury Corporation (TCorp)’s demand for long-dated issuance is driven by demand from borrowing clients. The recent back up in yields has seen less demand from these clients but the AOFM 30-year issue has certainly created opportunities for TCorp to issue in this tenor in the years ahead. The 30-year AOFM deal provides a visible longer point in the domestic market against which we can benchmark.

KENNEDY We get asked by investors if we would be prepared to issue longer-dated paper. Unfortunately, due to our limited amount of outstanding debt we would not be able to support a meaningful longer-dated benchmark curve. At the very least, any such lines would have very little liquidity. Also, the state does not have longer-dated liabilities that require us to maintain longer-dated issuance.

COLLINS There is a 30-year government bond but there appears to be very little liquidity in semi-government bonds beyond 12 or 15 years – though I’m sure that over time this gap will get filled.

Rather than introducing smaller lines at longer tenor, that might detract from liquidity, we have focused our issuance on the more liquid parts of the curve. Our clients have limited demand for longer-dated funding and many of our investors have preference for tenors only out to 10-12 years.

COLLARD Given the Export Finance and Insurance Corporation aims to match-fund its assets, if we are funding a long-dated project we would quite happily issue in the longer part of the curve. Given our explicit guarantee by the Commonwealth we expect this would be favourably received by the market.

BUTCHER Our longest outstanding maturity at this point is a 2027 line. Our bond lines mirror the NZDMO’s, although the NZDMO also has a 2033 and a 2037 on issue. We need to issue a new line later this calendar year and feedback from investors indicates there is good demand for a longer-dated bond. The only question mark for us is whether investors will continue to seek duration in a rising interest-rate environment.

The challenge will be to convince our council borrowers to bear the extra spread cost of issuing beyond 10 years. Therefore, while we are confident there would be sufficient investor demand for a New Zealand Local Government Funding Agency curve extension we can’t guarantee to be able to provide significant supply.

BISHOP All the borrowing we do in foreign currencies needs to be swapped back to New Zealand dollars and it is very hard to get a cross-currency swap beyond 20 years. So 20 years has become the natural limit.

If we look beyond the need for a cross-currency swap we could go out to 25 or even 30 years. But it would have to be an attractively priced option compared with a 15-year issue.

In the context of New Zealand dollar issuance, 15 years is again the maximum we have seen done and there are a limited number of institutions that will even go out beyond 10 years domestically.

NICHOLL We have no current plans for a further curve extension although we will maintain the 30-year maturity point as the longest bonds roll down the curve. We believe we have a sufficient variety of issuance options and a yield curve that is now comparable with those of other major sovereigns.

We will also continue to issue to support the 20-year futures contract. Later in 2017, we will issue a 2041 line – and over time as the 30-year bonds roll down they will also start to support the 20-year futures contract by default.

KENNEDY I don’t think this changes the landscape at all. If the states continue to spend on infrastructure-curve extension still makes sense. This is because these projects are being funded for the future off the current interest-rate curve and the funding is still at historically cheap levels.

BUSH Yields were clearly more attractive in Q3 2016 and prior. If you take a long-term view including the use of funds over this cycle, yields continue to look relatively attractive. Extending our curve is a strategic decision where yields are only one consideration.

WHITFORD I do not think the goal of curve extension is redundant. We are very keen to extend our curve, but at a sensible price. These are targets on a long-term horizon. I believe in the next five years we will have enough investor interest to get some longer-term bonds in the market.

BUTCHER There is no change in New Zealand, either. The only risk we run is of investors or banks becoming gun-shy because they don’t want to be holding bonds in a rising interest-rate environment.

NICHOLL If outright yields rise and the curve becomes steeper it will highlight the trade off between what we refer to as funding risk reduction, which we get from increasing duration of the portfolio, and the cost of issuing longer. While we don’t at this stage have a set rule to follow in this regard, we continue to talk to Treasury about this as appropriate. We have viewed duration of the portfolio as a slightly lesser consideration to yield-curve and market-development aims in recent years.

JONES Our focus is on a consistent approach to issuance through the cycle, including during periods of sharp market moves such as those seen in recent years.