BNZ issues first NZ Covered Bonds in Europe

Media Release
For immediate release

18 November 2010

BNZ issues first New Zealand Covered Bonds in Europe

Bank of New Zealand has successfully priced its inaugural Euro denominated covered bond issue. Strong demand by European investors enabled the issue size to be scaled up to EUR 1b – an excellent result considering European sovereign debt concerns re-emerging in recent weeks.

“The transaction is another first for BNZ and New Zealand”, said BNZ Treasurer Tim Main. “It is the first New Zealand and Australasian covered bond issue in Europe, and follows the first NZD denominated covered bond issue of $425m also done by BNZ in June of this year”.

The term of the issue was seven years and priced at a spread of 0.61% p.a. over Euro mid swap. The transaction followed a successful European investor update, involving meetings with key investors across nine countries.

Covered bonds issued by the bank have a direct claim on a designated pool of mortgage loans and now represent a key part of term funding raised by major banks internationally.  

Covered bonds are to become an important element of BNZ’s term funding program, and will enable the bank to achieve greater investor and maturity term diversification.  

The bonds are also repo eligible under the Reserve Bank of New Zealand’s liquidity policy, that came into force from 1 April 2010.

“This inaugural Euro covered bond issue is a very cost effective form of term funding for BNZ said Tim Main. “It also increases the bank’s access to a significantly broader range of global investors”.

The issue follows considerable in-house development of BNZ’s covered bond capability.

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