#1ΤΕ ΤΑΙ ΟΗΑΝGA THE TREASURY New Zealand Government Debt Market Outlook March 2021 New Zealand Government#2Overview Fiscal Outlook Funding Strategy#3Summary of Forecasts 2020 2021 2022 2023 2024 2025 June years Actual Forecast Forecast Forecast Forecast Forecast Real production GDP (annual average % change) -2.1 1.5 2.6 3.7 3.8 3.2 Unemployment rate (June quarter) 4.0 6.6 6.8 5.7 4.7 4.0 CPI inflation (annual % change) 1.5 1.4 1.2 1.4 1.8 2.1 Current account (annual, % of GDP) -1.9 -2.8 -3.8 -3.4 -3.2 -3.2 Fiscal measures ($billions) Core Crown tax revenue 85.1 88.3 89.1 96.9 102.5 108.8 Core Crown expenses 108.8 114.2 109.1 112.0 115.3 118.7 Total Crown operating balance before gains and losses -23.1 -21.6 -16.4 -10.3 -7.5 -4.2 Core Crown residual cash -23.7 -40.2 -36.3 -23.7 -5.5 3.9 Net core Crown debt¹ 83.4 128.6 166.2 189.1 194.2 190.0 as a percentage of GDP Net worth attributable to the Crown 26.4% 110.3 39.7% 49.1% 52.6% 50.7% 46.9% 83.9 69.2 63.0 60.1 61.0 Note: 1 Net core Crown debt, excluding the New Zealand Superannuation Fund and advances (including lending under the Funding for Lending Programme - for more details see page 40 in the 2020 Half Year Economic and Fiscal Update). 2 The fiscal forecasts were finalised 30 November 2020. The economic forecasts were finalised on 13 November 2020. Source: Stats NZ, The Treasury#4Fiscal Outlook#5Operating Balance Source: The Treasury $billions 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 2011 2013 2015 2017 2019 Forecast 2021 2023 2025 Year ending 30 June -Half Year Update 2020 -Budget Update 2020#6Cash Deficit Source: The Treasury $billions 10 0 -10 -20 -30 -40 -50 2020 2021 Operating 2022 Forecast 2023 2024 2025 Year ending 30 June Capital - -Residual cash#7Net Core Crown Debt Projections $billions % of GDP 240 60 Forecast Projections 210 60 50 180 150 40 40 120 30 30 90 20 20 60 30 10 10 0 T 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Year ending 30 June Net core Crown debt -% of nominal GDP (RHS)#8Credit Ratings Rating Agency Domestic Currency Moody's Investors Service Aaa (stable outlook) Foreign Currency Aaa (stable outlook) Latest update 2-Apr-20 S&P Global Ratings Fitch Ratings AAA (stable outlook) AA+ (stable outlook) AA+ (stable outlook) 22-Feb-21 AA (positive outlook) 12-Jan-21 Source: The Treasury, Moody's Investors Service, S&P Global Ratings, Fitch Ratings#9Credit Ratings and Bond Yields 2.0 New Zealand Australia USA 10 year government bond yield (%) 0 5 1.0 L Canada Singapore Sweden Germany UK ♦ -0.5 AAA stable AAA negative AA+ S&P credit rating AA Sources: Bloomberg, S&P#10Hedged Yields % 2.0 1.5 1.0 0.5 0.0 -0.5 NZ US Yields as at 19 Mar 2021 Source: The Treasury, Bloomberg AU UK GM JP NZGB 10-year yield Peers Govt Bonds 10-year yield -FX Hedged NZGB 10-Year yield#11Funding Strategy#12Changes in Forecasts NZ$b 60 50 50 Source: The Treasury 40 40 30 20 10 10 2006 2007 2008 2009 Dec-19 I T Forecast 60% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 ■May-20 Sep-20 50% 40% 30% 20% Dec-20 -NZGBs as % GDP (rhs) 10% 0%#13HYEFU 2020 Announcements 2020 Total (forecast Year ending 30 June (face value) 2021 2022 2023 2024 2025 (Actual) period) Gross NZGB issuance (NZ$ billion) 29.0 45.0 30.0 30.0 30.0 25.0 160.0 NZGB maturities and repurchases (NZ$ billion) 5.4 11.1 0.0 15.9 13.5 13.7 54.2 Net NZGB issuance (NZ$ billion) 23.6 33.9 30.0 14.1 16.5 11.3 105.8 NZGBS outstanding (NZ$ billion) 94.2 128.1 158.1 172.2 188.7 200.0 n/a NZGBS outstanding (% of GDP) 30% 40% 47% 48% 49% 49% n/a Forecast T-Bills on issue (NZ$ billion) 11.9 8.0 6.0 6.0 6.0 6.0 n/a Change in NZGB issuance (relative to BEFU) n/a -15.0 -10.0 -5.0 0.0 n/a -30.0 Change in T-Bills on issue (relative to BEFU) n/a -2.0 -4.0 -4.0 -4.0 n/a n/a Source: The Treasury#14New Bonds Issued Via Syndication NZ$b 8 7 Numbers on bars refer to the maturity year of the bond 24 6 LO 5 3 27 28 2 25 31 1 30 20 2735 33 40 29 31 25 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Calendar years ■ Nominal bonds ■Inflation-indexed bonds ■Nominal bond tap Source: The Treasury#15Current NZGB Portfolio NZ$b 18 16 14 12 10 8 Source: The Treasury 64 2 0 May Apr May Apr Sep May Apr May Apr Sep May Apr Sep Apr Sep May 21 23 24 25 25 26 27 28 29 30 31 33 35 37 40 41 Nominal bonds on issue ■IIBs on isssue Available issuance capacity#16Increasing Average-Weighted Maturity Source: The Treasury Years 9.0 8.0 7.0 6.0 5.0 4.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 - Average weighted maturity of total NZGB portfolio (incl. IIBs)#17NZ Government Securities on Issue NZ$b 140 120 100 80 60 60 60 40 40 20 20 Source: The Treasury NZ$b 30 Forecast 25 20 20 15 10 10 LO 5 0 2013 2014 -Nominal Bonds 2015 2016 2017 2018 2019 2020 2021 -Inflation-Indexed Bonds (RH) -T-Bills (RH)#18Change in Portfolio Composition 31 JANUARY 2020 22% 3% 75% 18 MARCH 2021 13% 6% 1% 80% Source: The Treasury Nominal Bonds IIBs ■Treasury Bills ECP#195-Year IIB Breakeven-Inflation % 24 4 3 2 1 0 -1 2014 2015 2016 2017 2018 2019 2020 2021 -NZGB -UST -UKT -ACGB Source: The Treasury, Bloomberg#20March Tender Schedule NZ$m 450 400 350 300 250 200 150 100 50 Source: The Treasury 0 25 May Apr May Apr Sep May Apr May Apr Sep May Apr Sep Apr Sep May 21 23 24 25 26 27 28 29 30 31 33 35 37 40 41 Maturity date ■4-Mar-21 ■11-Mar-21 ■18-Mar-21 ■25-Mar-21#21Tender Dynamics Source: The Treasury 7 6 5 4 3 2 1 0 Sep 2020 Oct 2020 Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 Tender date Bid-Cover ratio -Bid-cover ratio 3 year average#22Offshore Holdings Source: RBNZ, Bloomberg NZ$b 80 70 60 50 40 30 20 10 Apr 05 Apr 08 Apr 11 Apr 14 Apr 17 Apr 20 Resident holdings of NZGBs (NZ$b) Non-resident holdings of NZGBs (NZ$b) -Non-resident holdings of NZGBS (%) (RH) As at December 2020 % 90 80 70 60 40 22320 50#23Syndication Statistics 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2024 Source: The Treasury ■New Zealand 2026 2027 - tap 2028 2031 tap 2041 Australia ■ Asia ■ Europe/UK North America ■ Other#24Source: RBNZ, Treasury calculations 4 8062000 620 18 16 14 12 10 NZ$b RBNZ Holdings at 31 December ག།། May-21 Apr-23 May-24 Apr-25 Sep-25 Apr-27 May-28 Apr-29 Sep-30 May-31 Free-float ■Held by RBNZ Apr-33 ⚫Total outstanding Sep-35 Apr-37 Sep-40 May-41#25RBNZ LSAP Programme NZ$b 60 50 40 40 30 20 20 10 0 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 -NZDM cumulative NZGB tender issuance -NZDM cumulative NZGB issuance (syndication plus tender) -RBNZ cumulative NZGB LSAP Source: RBNZ, Treasury#26Disclaimer This presentation has been prepared by the Treasury on behalf of the New Zealand Government and is for general information purposes only. 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