NSW Treasury Corporation Annual Borrowing Programme FY07-08

NSW Treasury Corporation
Annual Borrowing Programme FY 2007/08

(A$ Billion) 2005/06 2006/07
Net Maturities 7.5 1.4 6.5
Client Funding 2.0 2.0 6.4
Pre Funding -3.0 -0.5 -2.5
Funding Requirement 6.5 2.9 10.4

NSW Treasury Corporation’s (TCorp) funding requirement for 2007/08 is estimated at $10.4bn, reflecting the new funding requirements of $6.4bn for public sector clients and $6.5bn to meet the refinancing of maturing liabilities.  Maturities to be refinanced in 2007/08 of $6.5bn are substantially higher than in 2006/07 given the maturity of the March 2008 Benchmark bond. Favourable funding opportunities, and a lower than forecast client core funding requirement over 2006/07, has enabled TCorp to prefund $2.5bn of the 2007/08 funding requirement.

TCorp’s funding strategy over 2007/08 will continue to centre on maintaining large, liquid lines of Benchmark bonds (incorporating Domestic bonds and Global Exchangeable bonds) which are anticipated to provide around 70% of our overall requirement. Issuance will be supplemented by accessing offshore markets when funding can be sourced at margins below the Benchmark bond curve. Whilst over recent years TCorp has not issued offshore commercial paper for core funding, over 2007/08 it is anticipated that this market, along with the domestic Promissory Note market, will be utilised to assist with the smoothing of the maturity of the March 2008 Benchmark line.

During 2007/08, TCorp anticipates launching a new Benchmark bond line to replace the maturing March 2008 bond.  Details of the new line, including maturity, coupon and timing of the initial issue, will be determined following consultation with investors and dealer panel members.

Net new loans to clients over 2006/07 are estimated to have increased by $2bn. This is below the original forecast announced in the June 2006 budget, reflecting stronger fiscal and investment outcomes for the NSW Government over the past year, compared with Budget time forecasts.

Over the 2006/07 financial year, TCorp’s required funding task has been met by increased issuance of Benchmark bonds reflecting strong investor demand, particularly for Global Exchangeable bonds from offshore investors. Domestic Benchmark outstandings over the period to 31 May increased by $1.0bn and Global Exchangeable outstandings by $3.9bn.  Given the projected funding requirement for 2007/08 of $10.4bn, and the estimated 70% of this requirement (just over $7bn) to be funded from Benchmark bond issuance, this new issuance is projected to slightly exceed the volume of the maturing March 2008 bond. As a result, total Benchmark bonds outstanding are forecast to increase only marginally from current levels.