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Northern Territory Treasury Corporation Annual report 2013-2014



Northern Territory Treasury Corporation Annual report 2013-2014


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Northern Territory Treasury Corporation -- Periodicals; Finance, Public -- Northern Territory -- Periodicals

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9Annual Report 2014 Asat 30June2014, NTTC had eight institutional benchmark bond issues as detailed in Table 4. Table 4: Institutional Bond Issues as at 30June2014 Maturity Date Coupon Amount on Issue % $M 14 July 2014 5.75 500 20 October 2015 6.25 500 20 November 2016 5.75 500 17 November 2017 4.75 500 20 September 2018 4.75 500 20 September 2021 4.25 650 15 March 2024 6.00 650 15 March 2026 6.00 650 Table 5: Borrowing Performance as at 30 June 2013-14 2012-13 2011-12 2010-11 2009-10 % % % % % Average borrowing margin Short-term margin to bank bill swap (BBSW) rate - 0.05 - 0.04 - 0.04 - 0.04 - 0.05 Long-term (fixed rate) margin to AAA-rated semi-government security 0.37 0.36 0.38 0.22 0.24 Cost of borrowing achieved during the year Weighted average cost of borrowing 4.23 4.01 4.86 5.29 5.70 Total cost of funds Weighted average cost of funds 5.21 5.32 5.67 6.10 6.15 Portfolio Duration and Term to Maturity As at 30June2014, the weighted average duration of Territory debt on issue was 4.4years, an increase from the 4.0 years reported in June 2013. Similarly, weighted average term to maturity was slightly higher at 5.5 years compared to 4.9 years recorded in 2013. Interest Rate Risk Management NTTCs interest rate risk arises from cash flow mismatches in the maturity profiles and repricing dates of its financial assets and liabilities. NTTC manages its exposure to interest rate risk to avoid creating abnormally high refinancing requirements during periods of high interest rates, or unusually low refinancing requirements in periods of low interest rates (seeFigure 3 on page 10). NTTC may use interest rate swaps and forward start interest rate swaps to manage interest rate risk as required. The target level of interest rate exposure to maturing debt in any financial year is $600million, with a lower limit of $400million and an upper limit of $800million. This strategy continues to support NTTCs ability to respond to strong demand from institutional investors and create slightly larger and more liquid bonds series. The target will support the Territorys borrowing requirements anticipated for the next two to three years to fund the capital and operating expenditure requirements of Territory Government agencies, business divisions and government owned corporations.