These dynamics have resulted in a significant drop in New Zealand dollar nonsovereign issuance and a counterbalancing uptick in supply from local issuers in offshore markets. Other than New Zealand Debt Management (NZDM) syndication, New Zealand dollar issuance volume is significantly down in Q1 2025 (see chart). There is no sign of a rebound in Kauri supply while at the same time a clutch of local names have elected to print offshore (see table).

The New Zealand sovereign is tackling another enlarged funding programme in its current financial year, the last uptick for which came on 17 December 2024 – a NZ$2 billion (US$1.1 billion) increase that will take gross 2024/25 issuance to NZ$40 billion. NZDM’s task is forecast to remain high thereafter, staying at NZ$40 billion for the year ending 30 June 2026 before dropping marginally to NZ$38 billion in 2026/27.

Against this backdrop, the pipeline for offshore primary market deals from Kiwi borrowers has grown across asset classes. Mercury NZ is the latest corporate issuer to add to a slew of transactions, on 14 March printing its largest ever capital markets deal – a A$400 million (US$249.8 million) March 2031 green bond. Fonterra Co-operative Group mandated its Australian dollar return on 21 March.

From the public sector, New Zealand Local Government Funding Agency has made three inaugural outings in offshore markets recently (see box on this page). In this case, while the issuer is reducing the proportion of funding it expects to source domestically the decision to access new markets largely reflects a pivot away from Australian dollar supply. Auckland Council, by contrast, recently tapped the Kangaroo market – for A$500 million on 21 March.

Mandated 21 March

Source: KangaNews 1 April 2025

Speaking in March, Freya Morrison, director, debt capital markets at ANZ in Auckland, told KangaNews: “The Australian dollar market has been exceptionally strong in the year to date, supported by an impressive broadening of participating investors in recent years. Naturally, this has helped price and price tension across transactions. The currently favourable cross-currency basis swap also offers a conducive backdrop for offshore transactions from New Zealand issuers.”

The reality is that New Zealand borrowers have been able to print a better landed cost of funds offshore than they believe would be available at home. LGFA reported offshore prints landing 12-15 basis points inside its domestic curve. ANZ New Zealand’s 19 March euro senior March 2028 print landed at 62 basis points over mid-swap, 33 basis points inside its domestic retail senior print from 12 February. The latter has a slightly longer maturity, at February 2030.

“For those issuers that can look offshore to diversify their funding, it makes sense to seize the opportunities at the moment given where levels are offshore versus domestically,” Danny Keene, director, DCM at Commonwealth Bank of Australia in Auckland, acknowledges.

Mercury New Zealand’s rationale for choosing the Australian dollar market for its only debt capital markets transaction for the calendar year was volume, which Geoff Smits, the company’s Auckland-based treasury manager, tells KangaNews is typically more available for corporates in its peer group in Kangaroo format than it is in the domestic market. The issuer has a NZ$1 billon capex task across two wind farms and one geothermal plant expansion currently underway.

Despite credit spreads moving wider between the time the deal was first announced on 27 February and pricing, Mercury still managed to achieve its largest print in any currency to date. It was also able to extend its curve in Australian dollars, and Smits says the wider goal for the issuer is be a regular borrower in the Australian dollar market.

New deals will be driven by growth. “We have a pipeline of projects not yet ready for investment decision and I expect decisions won’t be made for at least another year and a half,” Smits says. “However, if we commit to further projects beyond the current pipe they could be quite meaningful.”

He adds: “Australian dollar corporate spreads are performing well despite recent market wobbles, and returning to the market also provides us with diversification. It is our aim to achieve multiple points on our Australian dollar curve and for the market to be more available to us going forward.”

Prior to its most recent deal, Mercury was last in the Australian dollar market in 2021. Smits observes the extent to which the market has evolved since then, particularly the support from Asia. He says demand out of the region today is fundamental to strong deal outcomes. 

“It is important to lock in engagement out of Asia to secure a successful transaction,” he says. “We did not roadshow in Asia on this occasion but we plan to actively engage with the region for future trades.”

While Mercury does not expect to return to markets in the near-term, the pipeline for corporate deals remains busy, sources tell KangaNews, despite a more volatile backdrop globally.

Smits says Mercury was also made aware of strong investor interest in corporate hybrid issuance during its deal roadshow in Melbourne and Sydney. This is a format the company has deployed in its domestic market in the past and, while it has not yet tapped the Australian market for a hybrid deal, Smits reveals that is able to look at the currency in future.