MARTIN We have seen the proportion of our offshore holdings and the outright dollar volume of them pick up, which is always encouraging and represents good investor diversity for us.

In the past two years, when we have been running more frequent and larger syndications, we have also seen some genuine new investor names. The 2051 bond was an example of this.

One could argue that if the RBNZ undershoots on its OCR [official cash rate] delivery, in theory yields could decline and our bonds rally to the benefit of holders. Investors have told us they also have their eyes on the RBNZ’s LSAP [large-scale asset purchase] programme, specifically on how the next steps are going to be communicated and what they might mean for New Zealand government bond supply.

BUTCHER Offshore investors make up about 30 per cent of our holdings and we have had strong participation by offshore investors over the past year – up from 20 per cent a year ago. We issued a net NZ$2 billion (US$1.3 billion) in bonds over the 2021 calendar year and offshore investors took up NZ$1.5 billion of this.

The offshore investor group is now at its all-time high in dollar terms and is also our largest group of investors – surpassing domestic banks and institutional investors. This is the first time this has occurred.

International demand has been across the curve although centred around the 2023-29 part of the curve.

We have seen new investors and old ones returning after having exited when New Zealand yield went below US Treasuries in previous cycles. They are coming back as the spread pickup has become attractive.

It has been surprising that we have had this much interest, given the barriers to investor engagement from COVID-19, lockdowns, inability to do roadshows and missing out on the personal interaction at KangaNews’s conferences. It has been refreshing to see that we have had increased participation.

BLIGH We have gone from less than 8 per cent of our bonds held offshore back around 2020 to a touch over 12 per cent. I agree 2021 was the year of the offshore investor and we saw a real pick up in offshore holdings of our bonds. Equally, there was greater certainty in our programme. As we saw the borrowing protocol lifted to NZ$8.3 billion from NZ$3 billion, investors have become more confident we will be here and there will be volume.

Scale is the big key for us. The feedback we receive from investors is that we need to get to a certain tranche size in our lines. Three of our nominal lines are now larger than NZ$1 billion. Offshore investors want liquidity, they tell us, purely because if they need to get out they can have some faith they can get a price on their holdings.

We would like to grab duration where we can but we have to be cognisant that we also need to build volume in the lines we have.

JOHN We do not encounter much offshore interest in our New Zealand dollar issuance because of the smaller size and shorter tenors of our trades. Generally, 10-15 per cent offshore interest is a good number for us in our New Zealand dollar deals. However, we saw a lot of offshore interest in the NZ$500 million 30-year bond we did in 2020.

Our main offshore engagement is with our foreign currency issuance. The last issue we did offshore was a green €500 million (US$572.6 million) benchmark transaction, and the engagement was very strong.

We did a couple of days of roadshows and the participation was fantastic. We had about 140 investors bidding into the book and issued bonds to nearly 100 of them. The work we are doing selling New Zealand, enhanced by green issuance, has received very positive feedback from our offshore investor base.

BUTCHER Foreign currency issuance has always been more expensive than domestic funding as we do not have home advantage. What has been surprising is that pricing has become less expensive recently.

We are monitoring it but our preference is to continue to build a liquid and extensive curve domestically and fund locally. But the cost of going offshore appears to be less than it has been previously due to tighter credit spreads and more attractive basis swaps. We have not yet decided to make that move, though.

MARTIN We stopped our regular tender issuance of inflation-indexed bonds In September last year, in response to a market where the feedback was that liquidity was not optimal and supply and demand needed to rebalance. We have not been tendering since then, though we have indicated we will return to market in March. In the interim, we took the opportunity to canvass feedback on ways to make the market more vibrant.

When we return we will take a slightly different approach to tendering – we will be a little more flexible. Rather than announcing what we are going to do in advance, we will survey demand and issue based on the information we get. We are also moving to a single-price auction methodology rather than a multiprice methodology for the nominal bonds.

I cannot really comment on what we have seen in the past few months because we have not been tendering. But we are hopeful these changes will make some improvements to the linker market. When we return it will be interesting to see whether the current inflation environment also contributes to increased demand.