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Friday November 26, 12:00 PM

World Bank NZ$699M Issue Brings Uridashi Mkt To Life

   By John Barton
   Of DOW JONES NEWSWIRES

WELLINGTON (Dow Jones)--Friday's sudden appearance of a jumbo-sized Kiwi dollar uridashi turned November from an average month for offshore New Zealand dollar bond issuance, to the third most active month of the year.

The uridashi, arranged for the International Bank of Reconstruction and Development by Daiwa Securities SMBC, helped give the already turbocharged New Zealand dollar a fillip, sending it to a 16-year high of US$0.7185 both overnight and then again in late afternoon Friday in New Zealand.

"There has been further buying out of Tokyo today, which suggests there will be further Kiwi dollar uridashis," said Basil Payn, head of spot foreign exchange trading at Westpac Bank New Zealand, Friday.

Prior to the huge uridashi hitting the market, issuance of Kiwi uridashis and eurokiwis for November was looking distinctly ordinary - especially compared with October, when combined issuance hit NZ$2.12 billion, making it the busiest month ever for New Zealand dollar bond issuance offshore.

Combined eurokiwi and uridashi issuance for November is now at NZ$1.47 billion, the third most active month of the year. The second busiest, at NZ$1.49 billion, was March.

The NZ$699 million two-year World Bank issue - the second largest this year - carries a 5.35% coupon and matures Dec. 8, 2006, said Nick Palaskas, head of capital markets at Daiwa Securities SMBC Australia, Friday.

"It's been a good year for the New Zealand dollar in uridashis. Kiwi is one of our core currencies and Daiwa was the leading uridashi issuer this year."

Three to four years ago, investing in the Kiwi was a more speculative activity, but now Japanese retail investors are becoming portfolio investors and holding for longer, he said.

"Three to four years ago there was more secondary-market trading, but now uridashis are held more for longer in portfolios," Palaskas said.

The World Bank issue is the third largest Kiwi dollar uridashi this year, after Daiwa arranged a NZ$1.0 billion jumbo-sized issue, also for two years, for the surpranational in early March.

The second biggest uridashi for the year - NZ$724 million - was issued by another supranational, the Inter-American Development Bank in October, also arranged by Daiwa.

Although Daiwa kept the latest World Bank jumbo uridashi well under wraps, by Thursday afternoon evidence was mounting that a large Kiwi uridashi was on its way.

Currency traders reported Kiwi-buying out of Tokyo Thursday, as well as receiving interest in the two-year interest-rate swap, although one swaps trader said receiving interest was greater Wednesday.

The receiving saw the two-year interest-rate swap's margin above the government bond yield widen by 1 basis point. But the widening in the spread was offset by paying interest by bank mortgage books. Currently, banks are engaged in a battle for market share in the two-year fixed-rate mortgage arena.

--By John Barton, Dow Jones Newswires, 64 4 4715-990;john.barton@dowjones.com.

-Edited by Paul Baylis


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