Funding The Corporation manages the Northern The Corporation’s funding sources are as Territory Government’s exposure to follows: funding risk by ensuring it is not » Wholesale Market exposed to a significant refinancing risk fixed interest securities in any financial year. The Corporation’s floating rate notes approach to minimise funding risk involves the diversification of promissory borrowing and investment activities » Retail Market across the maturity spectrum and Territory utilising a variety of funding sources to Migration Linked Bonds meet the Corporation’s requirements. Trading Margin on issue. An important influence on trading Figure 3 on page 8 shows the margins is the perception of liquidity. Corporation’s borrowing margin relative The relatively small size to the Commonwealth and AAA rated of the Territory’s borrowing program central financing authorities. does not promote significant trading activity and, as such, the borrowing margin is more of a reflection of the Promissory Notes liquidity premium demanded by The Corporation’s funding institutional investors for supporting requirement is met through its the Corporation’s bond issuances. promissory note facility. These notes are issued by way of tender to our main The implied trading margin between a banking counterparties. Northern Territory bond and an interpolated AAA rated The Corporation had $50 million of state government fixed interest security promissory notes outstanding as at 30 has deteriorated throughout June 2012. The promissory note facility the course of the year, increasing by was used throughout the year to meet funding requirements. around The weighted average yield achieved for 0.16 per cent. This can be primarily the financial year was 4.49 per cent, with attributed to an average margin to bank bill swap (BBSW) reference the ongoing uncertainty in Europe, which rate of per cent. The issuing resulted margins to BBSW in ranged from per cent to in a deterioration in credit markets and per cent. placed Migration Linked Bonds further pressure from investors for The bonds offered by the Corporation liquidity on all satisfy the criteria of a Designated Investment under the following borrowers. The Corporation accepts the programs administered by the widening Department of Immigration and Citizenship spread reflects the increased liquidity (DIAC): premium Business Skills Migration demanded by investors and the strategy Investor Retirement Migration to The Corporation did not receive any increase the term and duration of bonds applications for Designated Investments
Funding The Corporation manages the Northern Territory Government’s exposure to funding risk by ensuring it is not exposed to a significant refinancing risk in any financial year. The Corporation’s approach to minimise funding risk involves the diversification of borrowing and investment activities across the maturity spectrum and utilising a variety of funding sources to meet the Corporation’s requirements. The Corporation’s funding sources are as follows: » Wholesale Market fixed interest securities floating rate notes promissory » Retail Market Territory Migration Linked Bonds Trading Margin An important influence on trading margins is the perception of liquidity. The relatively small size of the Territory’s borrowing program does not promote significant trading activity and, as such, the borrowing margin is more of a reflection of the liquidity premium demanded by institutional investors for supporting the Corporation’s bond issuances. The implied trading margin between a Northern Territory bond and an interpolated AAA rated state government fixed interest security has deteriorated throughout the course of the year, increasing by around 0.16 per cent. This can be primarily attributed to the ongoing uncertainty in Europe, which resulted in a deterioration in credit markets and placed further pressure from investors for liquidity on all borrowers. The Corporation accepts the widening spread reflects the increased liquidity premium demanded by investors and the strategy to increase the term and duration of bonds on issue. Figure 3 on page 8 shows the Corporation’s borrowing margin relative to the Commonwealth and AAA rated central financing authorities. Promissory Notes The Corporation’s funding requirement is met through its promissory note facility. These notes are issued by way of tender to our main banking counterparties. The Corporation had $50 million of promissory notes outstanding as at 30 June 2012. The promissory note facility was used throughout the year to meet funding requirements. The weighted average yield achieved for the financial year was 4.49 per cent, with an average margin to bank bill swap (BBSW) reference rate of per cent. The issuing margins to BBSW in ranged from per cent to per cent. Migration Linked Bonds The bonds offered by the Corporation satisfy the criteria of a Designated Investment under the following programs administered by the Department of Immigration and Citizenship (DIAC): Business Skills Migration Investor Retirement Migration The Corporation did not receive any applications for Designated Investments
AR-NTTC-1112.docx