Title of Report: TREASURY ACTIVITY REPORT TO 31^^ JANUARY 2011

Transcription

1 61 Tauranaa Gty To: From: Projects & Monitoring Committee Group Manager: Business Services Meeting Date: 2nd March 2011 Report No: DC 45 Title of Report: TREASURY ACTIVITY REPORT TO 31^^ JANUARY 2011 Purpose of Report: Significance of Decision: Report Writer(s): Information Not Significant Mohan De Mel, Treasury Manager Summary The purpose of this report is to provide an update of Treasury activities for the pehod ending 31 January 2011.

2 62 Recommendation That it be Resolved (a) That the Group Manager: Business Services' Report (DC 45) be received. 1. MARKET COMMENT The Reserve Bank (RB) left the Official Cash Rate (OCR) unchanged at 3.00% on 27 January. This decision was widely expected and the press release accompanying the decision largely reiterated RB's December Monetary Policy Statement view. Although the economic dataflow since December has been weaker with a contraction in 3^^ quarter GDP and weak retail sales. This weak economic data was not matenal enough for the RB to revise its future outlook on the economy. The RB indicated that they wish to see concrete signs of positive forward looking economic indicators translate into actual economic activity before responding with monetary policy changes. As a result of weak economic conditions the market is now pncing OCR increases to commence in September / October 2011 (previously June). The table below shows the 'Official Interest Rate' compahsons: Official Interest Rate Date Last Changed Date Last Reviewed Next Review New Zealand 3.00% 29 Jul Jan Mar 2011 Australia 4.75% 2 Oct Feb Mar 2011 United States Feb Feb Mar 2011

3 63 The graph below shows the trend in the 90 day and the 5 year interest rates. 90 DAY BANK BILL RATE AND 5 YEAR SWAP RATE , 5.50 ^ H H '31-Oct Nov-IO 31-Dec Jan Day Bank Bill Rate -m- 5 Year Swap Rate The graph below shows the NZD against USD and AUD. USD NZD/USD and NZD/AUD AUD r ) cn TO 5 CC "''"" ~ ^~~~"~-^~~B- ' ' " ^ 1 31-Oct Nov-IO 31-Dec Jan NZD/USD '-m-nzd/aud

4 64 2. TREASURY PERFORMANCE Financial Summary II II Actual 30 June 2010 $M ^-^ Maturing Within 1 Month Maturing Within 2-3 Months Actual 31 Dec 2010 SM Movement January 2011 $M 1.7 (1.0) Actual 1 31 Jan 2011 $M 17.7 II 23.0 Maturing Over 3 Months 8.0 (6.3) Total Cash & Investments 48.0 (5.6) Maturing 1 July June Maturing 1 July June Maturing 1 July June Maturing After 1 July 2013 Total External Debt Net Debt (a) Investments Highlights from January were: Investments of $16.0m matured with interest rates ranging from 4.20% to 5.10%. New investments of $4.7m were undertaken with interest rates ranging from4.55% to 4.60%. Cash and investments balances at month end: 30 June 2010 $6.0m (g 31 July August September 2010 $25.5m (g 31 October November December January % 3.40% 3.77% 4.23% 4.39% 4.42% 4.54% 4.44% The graph below shows the average dailv cash and investments balances held by month and then compares the daily average return on cash and investments to daily average call, 30, 60 and 90 day bank bill rates (benchmark rate). RETURN ON CASH AND INVESTMENTS COMPARED TO BENCHMARK RATE Jun Jul Aug Sep Oct ISM Actual Daily Average Investment Rate Benchmark Rate

5 65 (b) External Debt Debt movement duhng January were: $18.0m of short-term debt (Commercial Paper) matured and then reissued for 3 months; and As at 31 January 2011, external debt was $394.4m at an average cost of 6.22%. Debt matuhties for the next 12 months are as follows: $7.0m $18.Om $25.Om $10.Om $20.Om $30.Om $5.0m February 2011 (Commercial Paper) April 2011 (Commercial Paper) Aphl 2011 May 2011 June 2011 (bank facility to be renegotiated) July 2011 August 2011 The graph below shows total external debt at month end and associated average interest rates over the last 12 months. TOTAL EXTERNAL DEBT AT MONTH END 7.00% $394.4 $394.4 $394,4 $394,4 T $ % $375 $ % - $ % - - $ % $ % 28 Feb 31 Mar 30 Apr 31 May 30 Jun 31 Jul 31 Aug 30 Sep 31 Oct 30 Nov 31 Dec 31 Jan J-$250 I i$m Average Interest Rate

6 66 The graph below shows the actual debt at each month end compared to portion of debt with fixed interest rates. Oct-2010 Nov-2010 Dec-2010 Jan-2011 I Actual Debt D Current Fixed Rate Debt The chart below shows actual debt (gross debt) as compared to net debt. The net debt increasing in line with budgeted cash flows. Revised net debt is now forecast to be in the range of $363 to $367m at 30 June Oct-2010 Nov-2010 Dec-2010 Jan-2011 I Actual Debt D Net Debt

7 (c) Public Debt 67 The table below shows the gross internal debt representing total loan funding provided to activities. These loans are funded from external debt, internal sources (such as depreciation reserves) and retained histoncal surpluses. 1 Activity 1 Route K Actual October 2010 J_ $m 55.3 Actual November $m 55.4 Actual December $m 55.6 Actual 1 January $m Pyes Pa Bypass , Airport 1 Parking , ,5 1 4,9 1 1 strategic Property 34, ,7 1 1 SIF II other (incl TCVL & BOP LASS) 23, ,4 1 7,0 II 1 Total Non Rate Funded % % % II 30.1% 1 1 Wastewater UAC Funded 9.5% 9.5% 9.5% 9.4% 1 1 Water Supply UAC and Meter Charge 1 Funded 9.5% 9.1% 9.0% 9.0% 1 II Solid Waste 1 Stormwater , ,8 1 1 Roading ,9 1 1 Open Space - Parks & Coastal ,3 1 1 Indoor Space & Active Living , Libraries ,7 1 1 Aquatics Property ,2 1 1 Other ,8 II 1 Rates 1 Revenue Funded II 513% 51.2% 57.5% 515% II 1 Total Gross Internal Debt II 1 Total Net Internal Debt ,3 II 1 Total Gross External Debt II 1 Total Cash & Investment (71.4) (63.5) (48.0) (42,4) 1 II Net External Debt II

8 68 (d) Development Contributions Overview Development Conthbutions (DC) revenue budget (both BIF and SIF) is $11.5m for the financial year 2010/11, approximately $0.96m per month. January year to date DC revenue was $4.8m. The chart below shows the current year DC revenue by month as compared to the last financial year. Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun / /11 Duhng January, 41 new dwelling permits were issued, same as January The chart below shows the new dwelling permits issued duhng the current financial year as compared to last year. = E I- 0) -l Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010/ /10

9 69 RISK MONITORING (a) Counterparty Credit Limits / Credit Ratings There have been no counterparty exposures exceeding the approved limits duhng the current financial year. (b) Treasury Limits The Treasury Policy outlines the management framework for funding, interest rate, liquidity and credit risks associated with investments and liability management activities. Both interest rate hsk and debt matuhty (liquidity) are managed with minimum and maximum percentages by time bands. These minimum and maximum levels by time bands are designed to minimise matuhty and interest rate rephce hsks. The hsk management framework ensures that the overall cost of debt remain relatively stable over time. The tables below show the limits in relation to firstly debt matuhty (liquidity) and then interest rate hsks. Forecast 30 Jun Years Minimum 20% Maximum 60% 57% 2-4 Years Minimum 20% Maximum 60% 4 Years Plus Minimum 10% Maximum 60% 18% 31 Jul % 24% 18% 31 Aug % 23% 18% 30 Sep % 23% 18% 31 Oct % 35% 26% 30 Nov % 34% 31 Dec % 34% 31 Jan % 34% All maturity band percentages are within the recommended maturity band ranges. Forecast 30 Jun 2010 Overall Minimum 55% Maximum 95% 90% Sub- limit 1-3 Years Minimum 10% Maximum 60% 29% Sub-limit 3-5 Years Minimum 10% Maximum 60% 33% Sub-limit 5 Years Plus Minimum 10% Maximum 60% 38% 31 Jul % 31% 40% 29% 31 Aug % 30% 40% 30% 30 Sep % 28% 42% 30% 31 Oct % 37% 38% 30 Nov % 41% 34% 31 Dec % 33% 36% 31% 31 Jan % 30% 38% 33% The "Overall" interest rate cover is 83% as at 31 January indicating that 83% of forecast net debt in 12 months time is hedged to fixed interest rates. Forecast net debt for 31 January 2012 is $410.7m. All interest rate cover levels are within recommended matuhty limits. 9

10 70 (c) Foreign Exchange There are no outstanding balances as at 31 January. (d) Interest Rate Risk Management The following interest rate swaps were entered into duhng December and January. Amount $25.Om Start Date 15Jun2011 Maturity Date 15 Apr 2016 fiiterest Rate 90 days rate plus 1.195% Comments Retail Bond Issue interest rate converted to a floating interest rate. $5.0m 15 Jun Jun % Existing swap maturing 16 Jul 2012 (g 5.96% extended to 15 Jun 2015 and the rate reduced from 5.36%. $5.0m 15 Jun Jun % Existing swap maturing 21 Jun 2012 (g 5.72% extended to 15 Jun 2015 and the rate reduced from 5.50%. $5.0m 15 Jun Jun % Existing swap maturing 16 Jul 5.77% extended to 15 Jun 2015 and the rate reduced from 5.50%. 4. Decision-Making Considerations Significance of Decision, Issue and Matters The matters in this report have been assessed against the Significance Policy. In accordance with the general approach, chteria and thresholds of the policy, the author of this report considers that the: Decisions on Treasury Activity are not significant. Issues/matters included in the Treasury Activity are not significant. This conclusion is based on the following factors: Issue or Matter Significant / Not Significant Reason j Receipt of Treasury Monitoring Information. Not significant The report is for information j only and Council is not j required to make decisions on j this information. 1 Dean Riley Group ManagerTBusiness Services 15 February