NZX NZ Kauri Bond Indices

Introduction

The NZX Kauri Bond Indices were developed in conjunction with ANZ National Bank in response to feedback from investors for this rapidly growing market.

The NZX New Zealand Kauri Bond Indices are designed to supplement the NZX Corporate Bond Indices. Kauri Bonds are debt securities issued in New Zealand dollars, by non-resident issuers.

NZX calculates both a Kauri Bond Index and a Composite Government & Kauri Index:

• NZX Kauri Bond Index
• NZX Composite AAA Bond Index

Index Calculation

The Kauri bond indices are calculated in the same way as the Corporate bond indices. Kauri bonds satisfying certain criteria are added to a portfolio in proportion to the total market value on issue for each bond. Coupons received are likewise reinvested into all the bonds in the portfolio in proportion to the total market value on issue for each bond. Since each index measures gross returns (capital movements plus income), their value shows no tendency to decline sharply around coupon dates.

Pricing

NZX receives spread to swap data for each bond in the indices from the major NZ trading banks at the end of each month. The average spread rate from the contributors is used to calculate a yield for each bond which is used in the index calculation.

Index Criteria

• Securities must be issued in $NZ into the NZ domestic market by AAA rated Supranational, Sovereign/Semi Government and Agency Issuers that are accepted by The Reserve Bank of NZ as repo eligible securities under the Official Reverse Repo Facility.
• All securities must bear fixed rates of interest
• The issue must be reasonably available for purchase by a range of investors.
• Where securities have dual maturity dates or callable/putable features, they will be priced to the first maturity date or call/put date, as is market convention.
• When a new tranche of kauri bonds is issued that satisfies the requirements of the index, it will be added to the portfolio at the end of the first month following the issue. Issues must have settled at least 5 days prior to the month end to be added to the index at the end of that month. Issues with a settlement date less than 5 days before the end of a month, will be added to the index at the end of the next month – provided they meet all of the requirements of the index.
• When a tranche is issued over a range of dates, it will be entered upon the first available month end if sufficient volume has been issued to that date to see it comply.
• When bonds are redeemed by the issuer, the appropriate adjustment will be made to its face value at the end of the first month following redemption.

NZX Kauri Bond Index:

• Underlying credit rating of issuer or security issued: AAA rated only
• Minimum issue size: $NZ100 million.

NZX Composite AAA Bond Index:

• An index of all bonds eligible for inclusion in the Kauri Bond Index and the Government Bond index, weighted according to market capitalisation.

To subscribe to this data please contact: data@nzx.com.

NZX Kauri Bonds as at 30/04/2008