Market News 29 June 2026

Johnny Lee writes:

The recent spate of new bond offers, with issuance from Ryman, Oceania and Infratil in the last two months, have reinforced a trend observed across the market of late.

All three issues were subject to significant scaling due to excess demand. Ryman, which publicly declared its level of demand, received $445.3 million seeking investment, compared to an offer size of $100 million. Ryman elected to accept another $50 million of oversubscriptions.

Scaling, of course, is not uniform. Minimums cannot be scaled, and the presence of rollovers – whereby some of the existing RYM010 were purchased and reissued as the new RYM020 – also complicated affairs.

However, the simple reality is that 150 is not divisible by 445.3. New investors, seeking a figure above the minimum, were going to be disappointed.

The Oceania offer also saw significant scaling.

The obvious conclusion is that the amount of money seeking long-term bonds at current levels is well beyond the capacity of our bond market to process. 

This reflects both the lack of product earlier this year, and the enthusiasm for fixed-rate products at current rates. The volatility seen in the oil price has been an important factor in investors choosing to lock in rates at current levels.

A pleasing conclusion would be to see more issuers emerge, taking advantage of investor willingness to consider long-term investments outside of lower-yielding, Government guaranteed term-deposits.

This state of market disequilibrium is also evident on the secondary market.

The secondary market, in this context, refers to the NZDX or the New Zealand Debt Exchange. Bondholders are able to sell their bonds before maturity, to both institutional and retail investors.

However, anyone watching these listings will have observed a pattern, whereby demand is once again exceeding supply. Investors are being asked to summon greater and greater levels of patience, as they wait for sellers to emerge on the market.

Again, this is simply a reflection of supply and demand. Bondholders are increasingly preferring to hold their bonds to maturity, while bond investors, unsatisfied by the slow pace of new issuance, leap over each other to secure long-term cashflow.

The good news is that the pace of new bond issues has begun to increase. A number of issuers are said to be looking at the bond market over the coming months, although rapidly evolving interest rate markets are not making their jobs any easier.

With oil prices soaring earlier in the year, inflation expectations rose and fears around interest rate hikes were palpable. Most economists were predicting multiple rate hikes, concerned that high oil prices would flow through to the general economy. Now, Brent is approaching the $70 mark, and economists are rapidly winding back the expected pace of these hikes.

For now, demand for fixed interest product is strong and exceeding available product. With luck, new options will emerge over the coming weeks and months for investors to consider.

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The ongoing discussion regarding Kiwisaver highlights an important debate for the country, specifically surrounding the affordability of retirement for our younger generations.

The issues surrounding fertility rates and our “demographic bulges” are well known. New Zealanders are having fewer children, and the large number of children born in the 1950s and 1960s are now either retired or approaching retirement.

This means dependency ratios are rising, which will inevitably place pressure on our nation’s budget, impacting debt levels or Government spending. 

Perhaps decisions were once made assuming these ratios would somehow stay constant. It is worth remembering that these are global issues, and efforts made to reverse these trends have highlighted just how entrenched these trends have become.

Regardless, the reality now is that can-kicking may be nearing the end of its useful life.

The most critical issue is certainty. 

Retirees, or soon-to-be retirees, have spent their lives saving and investing on the basis of assumptions surrounding superannuation levels. Both consumption and saving rates are influenced by these factors, and different choices would have been made had the rules been different. 

The same is true for young investors today. 

If the intention is to adjust these rules, whether in terms of the amount, the age of eligibility or simply the eligibility itself, these adjustments need to be confirmed as soon as possible, and as entrenched as possible. A concrete set of rules allows our future retirees to plan accordingly.

The current discussion surrounding compulsory Kiwisaver may spark this debate. Currently, Kiwisaver has 3.4 million members, 40% of whom do not actively contribute. This grouping includes children and retirees, those out of work and even the deceased.

Compulsory Kiwisaver will be an unpleasant consideration for many, especially those on the cusp of financial hardship, or those who prioritise liquidity and prefer to control their own savings.

Hopefully, a middle ground can be found which accommodates these scenarios.

In the meantime, political certainty is becoming increasingly necessary. Investors make decisions every day, based on a set of rules. If demographic change or financial necessity require these rules to change, then the earlier this is known, the better prepared younger investors can be.

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KMD Brands, formerly Kathmandu Limited, has announced a large-scale share consolidation, two months after raising capital at a price of only 6 cents.

The consolidation of 25 for 1 will reduce the listed shares from 1.8 billion to 72 million (rounded) and should, in theory, send the share price from 8 cents back to $2 a share.

This will take effect on the 2nd and 3rd of July, with New Zealand trading post-consolidation first.

In theory, share consolidations should have no impact on the value of a company. Its assets and future prospects do not change by the quantity of shares on issue, whether this number is a billion or a million. 

In practice, share consolidations can cause confusion, particularly for shareholders who do not actively follow market news. These shareholders will see their shares rapidly increasing in nominal share price, inflating portfolio values when compared to pre-consolidated figures. 

Some shareholders also dislike holding tiny numbers of shares. This is more of a psychological factor but can drive investment (or divestment) decisions.

For Kathmandu, its journey from $1.50 only 4 years ago – or $37.50 on a post-consolidation basis – to 8 cents has been difficult for shareholders to endure. Retail is clearly struggling at the moment, battling both economic headwinds and structural change, as consumers are confronted by a much more global offering than years past. 

The company’s focus so far has been balance sheet strengthening and targeting sustainable markets and profitability. Once consumer confidence returns and discretionary income rises, the company hopes to be well placed to capture this demand.

Shareholders will be notified of their new shareholdings early this month.

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Paraparaumu Seminar

The first of our seminars this year will be held at Southward Car Museum, Paraparaumu, on 7 July. Please contact us via email if you would like to attend.

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New Financial Adviser Position

We are currently looking to add an experienced Financial Adviser to the Chris Lee & Partners team.

This is a long-term role based in Paraparaumu, working closely with our long-standing clients throughout New Zealand.

If you are interested in learning more, please contact us confidentially at office@chrislee.co.nz.

Johnny Lee

Chris Lee & Partners Limited