Bloomberg Indices Indices

1 June 2017 //////////////////////////////////////////////// /////////////////////////////////////////////////////////////////////////////////

Bloomberg Indices Month in Review – May 2017

Month in Review ...... 2 Australian Market Performance ...... 6 New Zealand Market Performance ...... 9 Global Market Performance ...... 12 Market Yields ...... 15 Supply ...... 21 Maturities and Removals ...... 23 Index Market Capitalisation ...... 24

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Month in Review

Interest Rates

On 2 May, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 1.50%. Headline inflation was above 2%, while underlying inflation was about 1.75%. The housing market remained varied across the country. Labour market indicators remained mixed, with both unemployment and employment increasing and slow wage growth. The global economy was also showing a broad-based recovery. The RBA judged the decision to be consistent with sustainable growth and its medium-term inflation target. It also released its May Statement on Monetary Policy (see below).

On 11 May, the Reserve Bank of New Zealand (RBNZ) left the NZ official cash rate unchanged again at 1.75%. The upside surprise in March quarter inflation figures was viewed as transitory. However, headline inflation was expected to rise in line with non-tradeables and wage inflation over the medium term, while long-term inflation expectations remained “well-anchored” at 2%. Further, house price inflation had moderated and this was expected to continue. Although a broad-based recovery was apparent in the global economy, challenges included surplus capacity and political uncertainty.

On 3 May, the US Federal Open Market Committee (FOMC) held US interest rates unchanged at 0.75% to 1%. Although headline inflation had been running at close to the 2% target, core inflation declined in March and remained below the target, while market-based inflation compensation measures remained low. The FOMC regarded weak first quarter GDP results as transitory. It also stated that it would maintain its existing reinvestment policy from its asset purchase programme “until normalization of the level of the federal funds rate is well under way”.

On 11 May, the Bank of England (BOE) voted 7-1 to hold the UK Bank Rate steady at 0.25%. It also voted unanimously to maintain government and corporate bond purchases at £435bn and £10bn respectively. Aggregate demand “slowed markedly” in the first quarter, particularly in consumer-facing sectors, and wage growth had been “notably weaker than expected”, yet business investment growth strengthened. The sterling’s depreciation has caused CPI inflation to rise above 2%, and this was expected to continue and peak at “a little below 3%” in the fourth quarter. The BOE also released its latest May Inflation Report (see below). It reiterated that future interest rate moves would “depend upon the evolution of demand, supply, the exchange rate and therefore inflation”.

Additional Highlights

On 5 May, the RBA released its latest quarterly Statement on Monetary Policy . Forecasts were broadly unchanged from the February Statement : GDP was forecast at 2% to 3% in 2017 and expected to rise to 2.75% to 3.75% percent in 2018 and mid-2019, having grown at 2.5% in 2016. Unemployment was forecast to remain steady at 5% to 6% through the next two years, while both CPI inflation and underlying inflation were forecast at 1.5% to 2%, before increasing to 2% to 3% by mid-2019. Inflation was expected to be constrained by slow wage growth. Although there were signs of global economic improvements, they could be derailed by geopolitical shocks. Chinese authorities faced a difficult trade-off between supporting GDP growth and a further build-up of financial risks. The adjustment following the end of the mining investment boom appeared to be “well advanced”, as slowdowns in mining states eased. Subsequently, RBA meeting minutes, released on 16 May, stated that the March quarter inflation figure of 0.5% was in line with the RBA’s estimates, and improved its confidence in forecasting underlying inflation to reach 2% in early 2018. Additionally, the “the distinction between full-time and part-time work had become less important in assessing labour market conditions”, as part-time employment remained high despite growth in full-time work.

On 9 May, the Australian Government delivered its 2017-18 federal budget. A net operating budget deficit of A$19.8bn (1.1% of GDP) was projected for 2017-18 and A$10.8bn (0.6% of GDP) for 2018-19, but set to return to surplus the next two fiscal years (A$7.6bn and $17.5bn, or 0.4% and 0.8% of GDP, respectively).Underlying cash deficits were projected of A$29.4bn in 2017-18 (1.6% of GDP) and A$21.4bn in 2018-19 (1.1% of GDP), followed Page 2

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// by a return to surplus of A$7.5bn by 2020-21 (0.4% of GDP). Net debt was forecast at A$354.9bn (19.5% of GDP) in 2017-18 and expected to increase to A$375.1bn (19.8% of GDP) the next year before declining to 8.5% of GDP by 2027-28. Real GDP growth was projected at 2.75% for 2017-18 and 3% for 2018-19. A major bank levy that affects the big four Australian banks and Macquarie Bank was a surprise measure that is expected to generate A$1.5bn annually. Other key highlights included national infrastructure investment and a corporate tax rate cut to 25% by 2026-27. All three credit rating agencies, Fitch, Moody’s and S&P Global affirmed Australia’s AAA sovereign rating following the release. S&P Global also had a negative outlook, expressing concern over the budget deficit, household debt and housing prices. Subsequently n 22 May, S&P Global downgraded almost all Australian financial institutions’ credit ratings (23 in total) by one notch, citing vulnerability to high private debt and property prices. The big four Australian banks were spared, due to likely support from the Australian government.

On 11 May, the RBNZ’s latest quarterly Monetary Policy Statement , reported annual CPI inflation increased to 2.2% in the March quarter (from 0.4% in the December quarter). However, this was considered transitory and driven by tradeables, whereas non-tradeables inflation remained subdued but had increased since mid-2015. House price inflation had slowed since mid-2016. The Statement provided that the official cash rate was “expected to remain low for a prolonged period” and the RBNZ was “flexible in its approach to inflation targeting, looking through temporary volatility in inflation and setting policy in a way that avoids unnecessary volatility in output, interest rates, and the exchange rate”. The global economic outlook was improved but risks were skewed to the downside. NZ GDP (production) was projected at 3.1% in the 12 months to March 2017, 3.4% for the subsequent two years and 2.4% in 2020. CPI was forecast to fall from 2.2% (actual) in the 12 months to March 2017 to 1.1%, 1.9% and 2.1% in the following years. Unemployment over the same period was 4.9% (actual), 4.6%, 4.4% and 4.6% respectively. The official cash rate was expected to remain at around 1.8 to 2.0% over the period.

On 25 May, the NZ Government delivered its 2017-18 federal budget. The Operating Budget Before Gains and Losses (OBEGAL) surplus was projected to progressively rise over the next five years, from NZ$1.6bn in 2017 (0.6% of GDP) to NZ$7.2bn in 2021 (2.2% of GDP), compared with a surplus of NZ$1.8bn in 2016 (0.7% of GDP). Net debt was projected at NZ$62.3bn in 2017 (23.2% of GDP) and to peak at NZ$65.7bn in 2019 (22.1% of GDP) before declining to NZ$62.8bn in 2021 (19.3% of GDP). Key highlights included NZ$32.5bn in infrastructure investment over the next four years and NZ$373m for innovation investment. Real GDP growth was forecast at 3.1%, 3.5% and 3.8% for the next three years (ended June) before declining, while unemployment was forecast at 5% for the next two years and 4.6% in 2019. Inflation was projected at 1.8%, 1.6% and 2.1% over the same period. The NZ Debt Management Office (NZDMO)’s NZGB programme forecast gross issuance to remain at NZ$7bn for 2017-18 but was revised higher for the following three years, by a cumulative NZ$1bn compared to figures last reported in its December 2016 update.

According to the FOMC’s 2-3 May meeting minutes, released on 24 May, the first quarter slowdown in US GDP growth was attributed to transitory factors and growth was projected to bounce back in the second quarter. The labour market had clearly firmed, and the current 4.5% unemployment rate was judged to be at or below long-run normal levels. Near-term risks to the economic outlook were roughly balanced and included US fiscal policy and global risks, the latter of which included geopolitical risks and the impact of US monetary policy normalisation on emerging markets. Participants’ economic and inflation outlooks were “little changed” and “judged that a continual gradual removal of monetary policy accommodation remained appropriate”. “Most” participants thought it would “soon be appropriate…to take another step in removing some policy accommodation” if economic data arrived in line with their expectations. In turn, participants judged it “prudent to await additional evidence indicating that the recent slowdown …had been transitory before taking another step in removing accommodation”. Additionally, the FOMC would maintain the existing reinvestment policy of its asset purchase programme, as sizeable holdings of long-term securities fostered accommodative financial conditions. Subsequently on 26 May, US GDP first quarter growth were revised higher to 1.2% (from 0.7% in April advanced estimates). On 31 May, the US Federal Reserve released its latest Beige Book, which reported moderate growth and tightening labour markets, while price pressures remained unchanged from the last release.

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// On 10 May, the Bank of Japan’s (BOJ) Summary of Opinions, from its 26-27 April monetary policy meeting, indicated Japan’s growth was turning to “moderate expansion”, with a “positive output gap” and above-potential growth expected through fiscal 2018. In turn, CPI was “likely” to move towards 2% “around fiscal 2018” and remain at that level, although general caution remained over the momentum of inflationary expectations. On the same day, Governor Kuroda, in a parliamentary committee testimony, noted that Japan’s labour market conditions were “tightening” and wages were “rising moderately”, thereby supporting private consumption. The corporate sector had been improving, driven by increasing exports and production. In a separate speech, Governor Kuroda indicated that Japan’s monetary policy settings would be driven by domestic conditions, following calls for Japan’s monetary policy settings to take into account US rate hikes. Governor Kuroda stated that divergence in policy settings was “natural”, reflecting differences in underlying conditions and inflation.

According to the BOE’s May Inflation Report , released on 11 May, UK real GDP growth was revised to 1.9%, 1.7% and 1.8% for 2017, 2018 and 2019 (from 2.0%, 1.6% and 1.7% in February). CPI inflation was projected at 2.7%, 2.6%, 2.2% and 2.3% for 2017 and subsequent years respectively (from 2.4%, 2.8% and 2.5% in February). Unemployment forecasts edged lower to 4.7%, 4.7%, 4.6% and 4.5% for the same period (from 4.9%, 5.0% and 4.9% in February). Bank Rate forecasts also moved lower to 0.2%, 0.3%, 0.4% and 0.5% respectively. The projections assumed consumer prices would rise due to a weaker pound (without adverse effects on inflation expectations); modest near-term wage growth set to gradually rise over the forecast period; subdued household spending growth offset by increases in other components of demand; and higher exports due to the lower pound and improved global growth. The BOE stated that “if the [UK] economy follows a path broadly consistent with the May central projection, then monetary policy could need tightening by a somewhat greater extent over the forecast period than the very gently rising path implied by the market yield curve underlying the May projections”. Governor Carney stated the current policy stance depended on the trade-off between above-target inflation and slack in the economy, and that the overshoot of inflation was entirely due to the pound’s depreciation “which itself reflects fundamental factors that monetary policy could not affect”, describing current conditions as “exceptional”.

On 24 May, Moody’s downgraded China’s long-term credit rating from A1 to Aa3 for the first time since 1989 and cut its outlook from stable to negative. The credit rating agency expects China’s debt to increase over coming years, as growth becomes increasingly reliant upon sustained policy stimulus and it did “not think that the [Chinese authorities’] reform effort will have sufficient impact, sufficiently quickly, to contain the erosion of credit strength associated with the combination of rising economy-wide leverage and slower growth". The downgrade was criticised by China’s Ministry of Finance. On 26 May, the People’s Bank of China (PBOC) announced it planned to add a “counter-cyclical adjustment factor” in its formula for fixing the daily reference rate of the yuan against the US dollar, aimed at reducing volatility. Earlier on 12 May, the US and China announced a trade deal, which included allowing foreign credit ratings agencies to provide services in China. On 14-15 May, China hosted its first Belt and Road Initiative (BRI) forum and pledged US$124bn toward the plan.

Global equities were generally positive in May. Australia's S&P/ASX 200 Index was a notable exception (-3.37%), whereas the S&P NZX All Index posted a modest gain (+0.52%). The US S&P 500 Index touched a record high 2418 on 25 May, while the German DAX Index touched a record high 12,841 on 16 May. UK's FTSE 100 Index was among the stronger performers (+4.39%), reversing April losses (-1.62%) and outperforming the DAX (+1.42%) and Euro STOXX 600 (+0.75%) indices. In Asia, Hong Kong's Hang Seng Index also posted strong monthly gains in May (+4.25%), outperforming Singapore's Strait Times Index (+1.11%). Japan's TOPIX (+2.39%) and Nikkei 225 (+2.36%) indices saw monthly gains continue to strengthen. China's Shanghai Stock Exchange Composite Index fell 1.19%, while the Shanghai Shenzhen CSI 300 Index gained 1.54%, after both saw losses in April. US equities saw modest gains, with the S&P 500 Index and the Dow Jones Industrial Average Index (DJIA) gaining 1.16% and 0.33% respectively. Gold was unchanged for the month, at US$1,268, while oil sank about 2% to below US$49. The NZ dollar and euro both climbed about 3.2% against the greenback, which otherwise strengthened against most currencies. The Australian dollar fell against the NZ dollar (-3.8%) and the US dollar (-0.8%), while the British pound fell against the euro (-3.5%) and by about 0.5% against the greenback. The Chinese yuan onshore rate fell

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 1.1% for the month, while the offshore rate fell by 2.2%. The Japanese yen fell 0.6% against the greenback. On 8 May, the VIX Index reached its lowest level since December 1993.

In other news, the US, President Trump faced increased scrutiny as investigations into Russian links among members of his administration intensified. On 17 May, reports emerged of a memo alleging the president had requested former FBI Chief James Comey to end investigations into former national security adviser Michael Flynn, following Comey’s dismissal on 9 May, and saw public calls for an impeachment. The US President also faced scrutiny over purported intelligence disclosures while hosting the Russian Foreign Minister on 10 May. Further on 23 May, a US$2tn ‘accounting error’ in President Trump’s US budget plan was highlighted. At his first NATO meeting on 25 May, President Trump called for members to increase their financial contributions.

On 27-28 May, G7 leaders met in Italy and reaffirmed their “commitment to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve strong, sustainable, balanced and inclusive growth”, as well as “to fight protectionism, while standing firm against all unfair trade practices”. The US aside, remaining G7 members committed to “swiftly implement” the Paris Agreement on climate change. Earlier on 21 May, the remaining 11 members of the Trans-Pacific Partnership (TPP) free trade agreement, apart from the US (which withdrew in January), announced they would “assess options to bring [the TPP deal] into force expeditiously” at the Asia-Pacific Economic Cooperation (APEC) meeting in Vietnam.

Among other global highlights, on 9 May, South Korean President Moon Jae-In was elected into office, following the impeachment of predecessor Park Geun-hye in March. On 19 May, S&P Global raised Indonesia’s sovereign rating back to investment-grade (from BBB- to BB+), five years after Moody’s and Fitch. Earlier on 10 May, Jakarta governor Basuki Tjahaja Purnama ‘Ahok’ was sentenced to prison in a high-profile case. In Europe, on 14 May, Emmanuel Macron was inaugurated as French president, after winning second-round elections on 7 May. On 22 May, the UK suffered a deadly terrorist attack bombing. Brazilian President Temer faced impeachment calls and corruption allegations in mid-May, which saw Brazilian equities fall 8.8% and its currency fall by about 8% on 18 May. On 20 May, Iran’s President Rouhani won a second term four-year term. On 25 May, OPEC and non-OPEC countries announced a 9-month extension to production cuts first implemented on 1 January 2017 and which were set to end on 30 June. Global regulators also formed the Global Foreign Exchange Committee (GFXC) and launched the FX Global Code, a foreign exchange global code of conduct, on 25 May. North Korea continued to conduct missile tests in late May. Australia and HK launched free trade negotiations on 16 May.

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Australian Market Performance

The AusBond Indices continued to post positive returns across the board in May and outperformed equities. Monthly returns on the Composite indices were also stronger. The Inflation Credit Index posted the largest gain (+1.64%), followed by the Treasury Index (+1.32%), while the Bank Bill Index was the weakest performer (+0.15%). Although the Inflation Credit Index saw the largest increment in monthly returns relative to April (+ 68 basis points), returns weakened for the Inflation Government Index (-15 basis points) and the Inflation Index (-10 basis points).The Inflation Government Index had been the strongest performer in the prior two months. This saw the Composite Index (+1.17%) outperform the Inflation Index (+1.10%) by 7 basis points, whereas the Credit FRN Index gained 0.28% for the month.

Among the Composite indices, the Treasury Index (+1.32%) continued to outperform the Credit Index (+1.03%). The margin of outperformance also increased (29 basis points, compared to 24 basis points in April). The Semi Government Index and Credit Index both gained 1.03%, while the Supra Sovereign Index gained 0.95%. Among the Inflation Indices, the Inflation Credit Index (+1.64%) outperformed the Inflation Government Index (+1.06%) by 58 basis points. Returns on the Inflation Index (+1.10%) were comparable to the Inflation Government Index.

Australian equities posted sharp losses in May, as the S&P/ASX 200 Accumulation Index closed 2.75% lower. Accordingly, this saw the AusBond Composite Index outperform the S&P/ASX 200 Accumulation Index by 392 basis points for the month. For the second quarter to date, the AusBond Indices remain positive across the board, while the equities index has moved into negative territory (-1.75%). On a year-to-date basis, the S&P/ASX 200 Accumulation Index remains in positive territory (+2.98%), however it has underperformed all the AusBond Indices except the Semi Government, Credit FRN and Bank Bill Indices and is on par with the Supra Sovereign Index. Yet, on a one-year basis, returns on the S&P/ASX 200 Accumulation Index (+11.10%) are at least double that of the AusBond Indices, thereby reflecting the strong equities performance in the second half of 2016. For 2-year and 5- year investment horizons, equities have continued to outperform the AusBond Indices.

In May, the AusBond Indices continued to outperform their NZBond counterparts for the Composite Indices, while the reverse occurred again for the Bank Bill and Inflation Indices. The performance differential was generally similar to April. The notable exception was the Inflation Indices, where a strong monthly return on the NZBond Inflation Government Index (+4.33%) saw it outperform its Australian counterpart by over 320 basis points. The S&P/ASX 200 Accumulation Index also significantly underperformed its NZ counterpart (by 329 basis points).

Table 1. AusBond Total Return Performance: May 2017

Total Return Index May Apr QTD 12 MTH YTD 2 YR 5 YR AusBond Composite Index 1.17% 0.75% 1.93% 2.50% 3.18% 3.56% 4.48% AusBond Treasury Index 1.32% 0.86% 2.18% 2.06% 3.41% 3.41% 3.70% AusBond Semi Govt Index 1.03% 0.64% 1.68% 2.28% 2.70% 3.68% 4.81% AusBond Supra/Sov Index 0.95% 0.66% 1.62% 2.99% 2.98% 3.47% 4.76% AusBond Credit Index 1.03% 0.62% 1.66% 4.14% 3.39% 4.07% 5.41% AusBond Bank Bill Index 0.15% 0.15% 0.30% 1.84% 0.74% 2.05% 2.55% AusBond Credit FRN Index 0.28% 0.13% 0.41% 3.30% 1.58% 3.01% 3.89% AusBond Inflation Index 1.10% 1.20% 2.31% 2.75% 3.59% 2.35% 3.87% AusBond Inflation Govt Index 1.06% 1.21% 2.29% 2.63% 3.54% 2.23% 3.55% AusBond Inflation Credit Index 1.64% 0.96% 2.61% 4.54% 4.26% 4.07% 7.16% S&P/ASX 200 Accum. Index -2.75% 1.03% -1.75% 11.10% 2.98% 4.14% 11.92% Source: Bloomberg Finance L.P.

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2.0% 1.3% 1.3%

1.5% 1.3% 1.2% 1.2% 1.0% 0.8%

1.0% 0.7% 0.6% 0.6% 0.4% 0.4% 0.3% 0.3% 0.3% 0.5% 0.3% 0.2% 0.0%

-0.5% -0.2% -0.2% -1.0% -0.2% Monthly Return Return (%) Monthly

-1.5% -0.9% -0.9%

-2.0% -1.3% -1.4% Jun -16 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May -17 Monthly Retn Prior year comparison

Source: Bloomberg Finance L.P.

Chart 2. S&P/ASX200 Accumulation Index vs. Bloomberg AusBond Composite Index: Monthly Return Performance 2016/2017

8.0% 6.3% 6.0% 4.4%

4.0% 3.3% 3.0% 2.3%

2.0% 1.3% 1.2% 1.0% 0.8% 0.7% 0.6% 0.5% 0.4% 0.4% 0.2% 0.0%

Monthly Return(%) Monthly -2.0% -0.2% -0.2% -0.8% -1.3% -1.4% -1.6%

-4.0% -2.1% -2.5% Jun -16 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May -17-2.8%

AusBond Composite Bond S&P ASX 200 Accum

Source: Bloomberg Finance L.P.

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3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% BACM0 BATY0 BASG0 BASS0 BACR0 BAUBIL BAIL0 BAIG0 BAIC0 ASA51

Mar -2017 Apr -2017 May -2017

Source: Bloomberg Finance L.P.

1 The following indices are shown: AusBond Composite Index (BACM0); AusBond Treasury Index (BATY0); AusBond Semi- Government Index (BASG0); AusBond Supra/Sovereign Index (BASS0); AusBond Credit Index (BACR0); AusBond Bank Bill Index (BAUBIL); AusBond Inflation Index (BAIL0); AusBond Inflation Government Index (BAIG0); AusBond Inflation Credit Index (BAIC0); and S&P/ASX 200 Accumulation Index (ASA51). Page 8

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// New Zealand Market Performance

The NZBond Indices similarly delivered positive monthly returns across the board in May. Monthly returns were about 30 to 50 basis points stronger across the board compared to April, while the relative order of performance among the indices remained unchanged. Notably, the Inflation Government Index posted a distinctly larger gain (+4.33%), which was over 3 percentage above all other NZBond Indices and saw the index lead gains for another month.2 The Treasury Index (+1.27%) was the next-best performer in May, followed by the Local Government Index (+1.16%), Credit Index (+0.85%) and Supra Sovereign Index (+0.70%). Overall, this saw the Composite Index gain 1.08% for the month, whereas the Bank Bill Index (+0.17%) delivered the weakest monthly returns.

NZ equities delivered more modest returns in May, with the S&P/NZX 50 Gross Index returning 0.54%, following strong gains in April (+2.53%). The NZ equities index underperformed all NZBond Indices apart from the Bank Bill Index, thereby reversing its strong outperformance in April. Additionally, the S&P/NZX 50 Gross Index outperformed its Australian equities counterpart for the month, as the S&P/ASX 200 Accumulation Index posted a sharp loss (-2.75%). Although one-year returns on the Australian index remain more than double those on the NZ equities index (11.10% versus 5.39%), this is reversed on a year-to-date basis (2.98% versus 7.81%). Again, this reflects the relative strength of Australian equities in the second half of 2016, as the S&P/ASX 200 Accumulation Index gained 10.59% in that period. On a 2-year and 5-year basis, the S&P/NZX 50 Gross Index has outperformed the S&P/ASX 200 Accumulation Index.

For the quarter to date, the Inflation Government Index returned almost double the returns on the S&P/NZX 50 Gross Index (5.98% versus 3.09% respectively). However, the NZ equities index outperformed all other NZBond Indices over the same period. On a year-to-date basis and for longer 1-year, 2-year and 5-year horizons, the NZ equities index outperformed the NZBond Indices. Among the NZBond Indices, the Inflation Government Index was the best performer on a year-to-date, 1-year and 2-year basis, while the Credit Index was the best performer on a 5-year basis.

Table 2. NZBond Total Return Performance: May 2017

To tal Return Index May Apr QTD 12 MTH YTD 2 YR 5 YR NZBond Composite Index 1.08% 0.65% 1.73% 2.59% 3.23% 4.88% 4.15% NZBond Treasury Index 1.27% 0.79% 2.07% 1.84% 3.45% 4.84% 3.82% NZBond Local Govt Index 1.16% 0.71% 1.87% 3.45% 3.77% 5.29% 5.10% NZBond Non-Govt Index 0.77% 0.45% 1.22% 3.57% 2.79% 4.82% 4.82% NZBond SupraSov Index 0.70% 0.39% 1.09% 3.23% 2.53% 4.56% 4.15% NZBond Credit Index 0.85% 0.52% 1.38% 4.00% 3.11% 5.16% 5.44% NZBond Bank Bill Index 0.17% 0.17% 0.33% 2.19% 0.83% 2.57% 2.85% NZBond Inflation Govt Index 4.33% 1.58% 5.98% 4.22% 6.75% 6.31% 4.04% S&P/NZX 50 Gross Index 0.54% 2.53% 3.09% 5.39% 7.81% 12.66% 16.29% Source: Bloomberg Finance L.P. Note: 2 and 5 year returns are annualised.

2 Note: NZBond Inflation and Inflation Government Indices currently have the same membership. Page 9

2.0% 1.4% 1.5% 1.4% 1.1% 1.1% 0.9% 0.8% 0.8% 1.0% 0.8% 0.7% 0.7% 0.6% 0.6% 0.5% 0.3%

0.5% 0.3% 0.2% 0.2% 0.1% 0.0%

-0.5% 0.0% -0.1% Monthly Return Return (%) Monthly -0.3% -1.0% -0.5%

-1.5% -1.0% -1.0% Jun -16 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May -17 Monthly Retn Prior year comparison

Source: Bloomberg Finance L.P.

Chart 5. S&P/NZX50 Gross Index vs. Bloomberg NZBond Composite Index: Monthly Return Performance 2016/2017

8.5% 6.5% 6.5%

4.5% 2.5% 2.5%

2.5% 1.7% 1.1% 0.9% 0.8% 0.7% 0.7% 0.7% 0.5% 0.5% 0.4% 0.3% 0.5% 0.2%

-1.5% 0.0% -0.2% -0.5% -0.5% -0.9% -1.0% -1.0% Monthly Return(%) Monthly -3.5% -2.0% -5.5%

-7.5% -5.4% Jun -16 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May -17 NZBond Composite S&P/NZX 50

Source: Bloomberg Finance L.P.

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5.0%

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% BNZCM0 BNZTY0 BNZLG0 BNZNG0 BNZSS0 BNZCR0 BNZBIL BNZI0 NZSE50FG

Mar -2017 Apr -2017 May -2017

Source: Bloomberg Finance L.P.

3 The following indices are shown: NZBond Composite Index (BNZCM0); NZBond Treasury Index (BNZTY0); NZBond Local Govt Index (BNZLG0); NZBond Non-Govt Index (BNZNG0); NZBond SupraSov Index (BNZSS0); NZBond Credit Index (BNZCR0); NZBond Bank Bill Index (BNZBIL); NZBond Govt Inflation Index (BNZI0); and S&P/NZX 50 Gross Index (NZSE50FG). Page 11

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Global Market Performance

Australia (+1.32%) and NZ (+1.27%) led monthly gains among key Bloomberg Barclays sovereign indices in May. Their gains also strengthened by a larger amount (46 and 49 basis points respectively) compared to April (38 and 30 basis points respectively). Together with the Canadian index (+0.78%), they again comprised the top three monthly performers. The US (+0.65%), Hong Kong (+0.58%) and Eurozone (+0.57%) sovereign indices posted similar monthly gains to April. They were followed by the UK (+0.48%) and Singapore (+0.35%) sovereign indices. The Chinese index posted another distinct monthly loss (-1.08%) that was larger than in April (-0.79%). The German (-0.06%) and Japanese (-0.18%) indices posted milder losses.

On a one-year basis, the UK gilts index remained the top performer (+7.09%), continuing to dwarf key sovereign counterparts, although the relative outperformance has declined. It was followed by the Singapore (+3.24%), Australia (+2.06%), NZ (+1.84%) and Hong Kong (+1.20%) indices. In comparison, the US index was flat over the past year (0%), while Canada delivered a modest gain (+0.66%). Japan was the worst performer (-2.40%), followed by China (-1.42%). The German and Eurozone sovereign indices posted more moderate one-year losses (-0.66% and -0.54% respectively).

Chart 7. Bloomberg Indices Sovereign Debt Performance: May 2017 4

8.00% 7.00% 6.00% 5.00% 4.00% 3.00%

Return Return (%) 2.00% 1.32% 1.27% 0.78% 0.65% 1.00% 0.48% 0.57% 0.35% 0.58% 0.00% -1.00% -0.06% -0.18% -2.00% -1.08% -3.00% AUS NZ CAN US UK DE EUR JP SIN HK CN Mar -17 Apr -17 May -17 12 -mth

Source: Bloomberg Finance L.P.

Table 3. Bloomberg Indices Sovereign Debt Performance: May 2017

Return AUS NZ CAN US UK DE EUR JP SIN HK CN

May (mth) 1.32% 1.27% 0.78% 0.65% 0.48% -0.06% 0.57% -0.18% 0.35% 0.58% -1.08% Apr 0.86% 0.79% 1.09% 0.69% 0.27% 0.08% 0.52% 0.49% 0.72% 0.57% -0.79% Mar 0.48% 0.49% 0.21% -0.05% 0.33% -1.02% -0.60% -0.13% 0.14% 0.43% 0.12% 12-mth 2.06% 1.84% 0.66% 0.00% 7.09% -0.66% -0.54% -2.40% 3.24% 1.20% -1.42% Source: Bloomberg Finance L.P.

4 The Sovereign Indices shown are: Bloomberg AusBond Treasury (BATY0 Index); Bloomberg NZBond Treasury (BNZTY0 Index); Bloomberg Barclays Global Treasury Bond Index country subsets for Canada, US, UK, Germany, Euro, Japan, Singapore, Hong Kong; and the China Aggregate Treasury subset. Page 12

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Key global investment-grade corporate indices generally posted stronger monthly gains in May. The UK index (+1.25%) led monthly gains and delivered more than twice its return in April (+0.55%). It was followed by the US (+1.15%), Australia (+1.03%) and NZ (+0.85%) indices. The Chinese corporate index was the relative worst performer (-0.38%), as its negative return doubled from April (-0.19%). The Eurozone (+0.37%) and APAC (ex- Japan) (+0.24%) corporate indices posted modest monthly gains in comparison, while Japanese corporates were flat for the month (-0.01%). On a one-year basis, the UK corporate index dominated performance (+10.75%), similar to its treasury counterpart, followed by the APAC (ex-Japan) index (+7.10%). The US, Australia and NZ corporate indices all posted returns of about 4% or more, while Eurozone and Chinese corporate indices posted smaller gains (+2.80% and +1.33% respectively) and Japanese corporates were relatively flat (+0.28%).

Monthly performance of the corporate indices relative to their sovereign equivalents continued to be mixed in May. Australia and NZ saw stronger outperformance of treasuries over their corporate counterparts, by 28 and 42 basis points respectively. The Eurozone sovereign index also outperformed its corporate counterpart, by 19 basis points. Conversely, corporate indices outperformed sovereign indices for the US and UK, by 50 basis points and 77 basis points respectively. Chinese corporates similarly outperformed treasuries again in May (by 70 basis points), although both delivered negative returns (-0.38% and -1.08% respectively). This was mirrored in Japan, but by a lesser magnitude (-0.01% on corporates and -0.18% on treasuries). However, on a one-year basis, the corporate space dominated sovereigns across these indices. The performance differential was strongest for the US (426 basis points), followed by the UK (367 basis points) and Eurozone (333 basis points). Australia and NZ saw performance differentials of about 210 basis points, while it was higher for Japan and China, at about 270 basis points.

Chart 8. Bloomberg Indices Investment-grade Corporate Indices: May 2017 5

11% 10% 9% 8% 7% 6% 5%

Return(%) 4% 3% 2% 1.25% 1.03% 0.85% 1.15% 1% 0.37% 0.24% 0% -0.01% -1% -0.13% -0.38% -2% AUS NZ US UK Pan -Eur Euro JP CN APAC Mar -17 Apr -17 May -17 12 -mth (ex-JP)

Source: Bloomberg Finance L.P.

5 The global benchmarks for investment-grade corporate bonds shown are: Bloomberg AusBond Credit Index (BACR0 Index); Bloomberg NZBond Credit Index (BNZCR0 Index); Bloomberg Barclays US Corporate Bond Index (LUACTRUU Index); Bloomberg Barclays Sterling Corporate Bond Index (LC61TRGU Index); Bloomberg Barclays Euro-Aggregate: Corporates Bond Index (LECPTREU Index); Bloomberg Barclays Asian-Pacific Japan Corporate Index (LJC1TRJU Index); Bloomberg Barclays China Aggregate: Corporate Index; and Bloomberg Barclays Asian-Pacific Non-Japan Corporate Index. Page 13

Pan - APAC Return AUS NZ US UK Euro JP CN Eur (ex-JP) May (mth) 1.03% 0.85% 1.15% 1.25% -0.13% 0.37% -0.01% -0.38% 0.24% Apr 0.62% 0.52% 1.07% 0.55% 0.82% 0.54% 0.17% -0.19% -1.15% Mar 0.56% 0.60% -0.23% 0.20% -0.30% -0.36% -0.01% 0.13% -0.63% 12-mth 4.14% 4.00% 4.26% 10.75% 1.58% 2.80% 0.28% 1.33% 7.10% Source: Bloomberg Finance L.P.

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Market Yields

The Australian sovereign yield curve moved lower for another month and saw falls of a larger magnitude compared to April. Yield remained unchanged at the 1-year mark, fell by 11 and 17 basis points at the 2-year and 3-year mark respectively, and moved lower by 18 to 21 basis points across longer maturities compared to the end of April. Compared to the start of the year, the yield curve has moved progressively lower, by 18 to 35 basis points for maturities of 1-year to 4-years, and by 37 to 47 basis points lower for longer maturities. However, compared to a year ago, yields are 3 to 12 basis points higher from the 4-year mark onwards, but 17 and 12 basis points lower at the 1-year and 2-year mark respectively. In comparison, the NZ sovereign yield curve moved about 15 to 31 basis points lower in May, except for a 3 basis point rise for the 5-year yield. Since the beginning of the year, the NZ sovereign yield curve is about 10 to 34 basis points lower for maturities of up to 5-years, and by 55 to 70 basis points from the 10-year mark onwards. Similar to Australia, NZ sovereign yields are higher than a year ago from the 4-year mark (by 4 to 30 basis points) and but lower for shorter maturities.

Average yields continued to decline across the AusBond Indices for another month. Average yield fell the most for the Inflation Credit Index in May (-23 basis points), about double the 11 basis point decline on the Inflation Government Index for the month, and after falling 9 basis points in April. It was followed by the Credit Index (-18 basis points). Among the Composite Index constituents, yields fell in the order of 16 to 18 basis points, compared to 8 to 9 basis points in April. Average yield fell by 12 basis points for the Inflation Index and by 16 basis points for the Composite Index, while it was unchanged on the Bank Bill Index.

The average yield remains slightly higher than a year ago for the Treasury Index (+6 basis points) and Semi Government Index (+4 basis points), while it is lower on the Supra Sovereign Index (-12 basis points) and Credit Index (-23 basis points). Consequently, average yield on the Composite Index has remained largely flat relative to a year ago (-1 basis point). For comparison, the average yield on the Inflation Index has fallen 17 basis points from a year ago. The average yield spread of the Credit Index over the Treasury Index remained largely unchanged (73 basis points) from April, while the average yield spread of the Composite Index over the Inflation Index shrank by 4 basis points (to 166 basis points).

Chart 9. Bloomberg AusBond Indices: Bond Yields

3.50

3.00

2.50

2.00

1.50

1.00 Yield to Maturity to Yield

0.50

0.00 Comp Treas Semi Supra Credit Infl Infl Govt Infl Cred Bank Bill Mar -17 Apr -17 May -17 May -16

Source: Bloomberg Finance L.P.

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Average yields continued to decline across the NZBond Indices, apart from the Bank Bill Index, and by a larger amount. The Inflation Index saw the largest fall in average yield (-35 basis points), whereas it fell 18 basis points for the Composite Index. Among constituents of the Composite Index, average yield fell by 19 basis points for the Treasury and Local Government Indices, followed smaller falls on the Supra Sovereign Index (-17 basis points) and Credit Index (-12 basis points). For comparison, average yields fell by 3 to 9 basis points across the NZBond Indices in April, while it remained unchanged on the Bank Bill Index in May.

Average yield on the NZBond Treasury Index remains slightly higher than a year ago (+7 basis points), while it is lower for the Composite Index (-2 basis points) and all other NZBond Indices. Among the other constituents of the Composite Index, average yield declined the most for the Supra Sovereign Index (-22 basis points) compared to a year ago, followed by the Credit Index (-18 basis points) and Local Government Index (-15 basis points). It is also 9 basis points lower on the Inflation Index and 44 basis points lower on the Bank Bill Index. The average yield spread of the Credit Index over the Treasury Index increased 7 basis points in May (to 85 basis points), while the spread of the Composite Index over the Inflation Index jumped by 17 basis points (to 89 basis points).

Chart 10. Bloomberg NZBond Indices: Bond Yields

3.50

3.00

2.50

2.00

1.50

1.00 Yield to Maturity to Yield

0.50

0.00 Comp Treas Local Gov Supra Credit Infl Bank Bill

Mar -17 Apr -17 May -17 May -16

Source: Bloomberg Finance L.P.

Page 16

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Key Bloomberg Barclays sovereign indices generally saw average yields continue to decline in May.6 The key exception again was China, where average yield increased 32 basis points, after rising 19 basis points in April. The Japanese index also saw its average yield rise by 3 basis points, reversing a similar fall last month. New Zealand (- 19 basis points) and Australia (-17 basis points) saw the largest monthly declines in average yield, which were more than double those in April (-8 basis points and -7 basis points respectively). Yield on the Hong Kong index declined by a comparable amount to April (-15 basis points). Canada, US, UK, Eurozone and Singapore indices saw average yield declines of 2 to 6 basis points, while it fell about 1 basis point for the German index.

Yet despite the continued monthly declines, average yields remain higher than a year ago for many global sovereign indices. China (+83 basis points), US (+38 basis points) and Japan (+20 basis points) have had the largest increases relative to a year ago. Average yield is 13 basis points higher for the Eurozone sovereign index, while it is about 6 to 9 basis points higher for Australia, NZ, Canada and HK. Conversely, average yield is 44 basis points lower on the UK sovereign index and 12 basis points lower on the Singapore index relative to a year ago. Average yield is largely unchanged and in negative territory for the German sovereign index.

Ten-year global treasury yields generally ended the month lower again. China continued to prove an exception and increased 19 basis points (3.656%), while the Japanese 10-year yield rose 3 basis points (0.049%). The German 10-year yield remained largely unchanged again at 0.302% (-1 basis point), while it fell by 4 basis points for the UK (1.046%) and 8 basis points for the US (2.203%). In comparison, the 10-year yield fell 19 basis points for Australia (2.387%) and by 24 basis points for NZ (2.799%).

Chart 11. Bloomberg Indices Sovereign Bond Yields 7

4.00

3.50

3.00

2.50

2.00

1.50

1.00 Yield to Maturity to Yield 0.50

0.00

-0.50 AUS NZ CAN US UK DE EUR JP SIN HK CN

Mar -17 Apr -17 May -17 May -16

Source: Bloomberg Finance L.P.

6 Note: references to sovereign yields refer to those of the Bloomberg Barclays Global Sovereign Bond Indices in this section. 7 The Sovereign Bond Indices shown are: Bloomberg AusBond Treasury (BATY0 Index); Bloomberg NZBond Treasury (BNZTY0 Index); Bloomberg Barclays Global Treasury Bond Index country subsets for Canada, US, UK, Germany, Euro, Japan, Singapore, Hong Kong and China. Page 17

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Movements in average yields across the key global investment-grade corporate indices generally mirrored the sovereign space. There were general declines for the month, with the exception of China (+20 basis points) and Japan (+2 basis points). The Australian index saw the largest decline (-18 basis points), followed by the APAC (ex- Japan) (-17 basis points). Both these indices saw average yield declines double from April. They were followed by NZ (-12 basis points) and the UK (-11 basis points). In comparison, average yields declined by 9 basis points again for the US index and by 4 basis points for the Eurozone index.

In comparison to a year ago, average yields are significantly lower for the UK corporate index (-89 basis points), followed by the Pan-Euro (-40 basis points) and APAC (ex-Japan) (-29 basis points) indices. Average yields on the Australian and NZ indices are also about 20 basis points lower compared to a year ago. Conversely, average yields are 10 basis points higher for the Chinese index and marginally higher for the US and Japanese indices (2 basis points and 4 basis points respectively).

Chart 12. Bloomberg Indices Investment-Grade Corporate Bond Yields 8

5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00

Yield to Maturity to Yield 1.50 1.00 0.50 0.00 AUS NZ US UK Pan -Eur Euro JP CN APAC (ex-JP) Mar -17 Apr -17 May -17 May -16

Source: Bloomberg Finance L.P.

8 The global benchmarks for investment-grade corporate bonds shown are: Bloomberg AusBond Credit Index (BACR0 Index); Bloomberg NZBond Credit Index (BNZCR0 Index); Bloomberg Barclays US Corporate Bond Index (LUACTRUU Index); Bloomberg Barclays Sterling Corporate Bond Index (LC61TRGU Index); Bloomberg Barclays Euro-Aggregate: Corporates Bond Index (LECPTREU Index); Bloomberg Barclays Asian-Pacific Japan Corporate Index (LJC1TRJU Index); Bloomberg Barclays China Aggregate: Corporate Index; and Bloomberg Barclays Asian-Pacific Non-Japan Corporate Index. Page 18

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// The AusBond and NZBond Indices moved in response to economic data and global news during the month. The AusBond Indices fell on 4 May, following the overnight US interest rate decision and in line with key global sovereign indices. They moved higher on 10 May, following the overnight Australian budget release and also coinciding with the latest BOJ opinion release. The AusBond Indices moved higher again in mid-May, as global market responded to increased US political uncertainty over the President's dismissal of the FBI Chief and Russian ties, and again in late May following global market movements. The NZBond Indices posted strong gains on 11 May, led by the Inflation Index, in response to the NZ interest rate decision and latest data in the RBNZ's quarterly Monetary Policy Statement , which had stated the RBNZ would be "flexible" in inflation-targeting and interest rates were expected to remain low for a prolonged period. The NZBond Treasury Index and Composite Index continued to move higher the next day.

Chart 13. Bloomberg AusBond & NZBond Indices: May Daily Returns

1.50%

1.00%

0.50%

0.00%

-0.50% Daily ReturnDaily (%) -1.00%

-1.50% 1/5 3/5 5/5 7/5 9/5 11/5 13/5 15/5 17/5 19/5 21/5 23/5 25/5 27/5 29/5 31/5 BACM0 BATY0 BACR0 BAIL0 S&P/ASX200 Accum. Index BNZCM0 BNZTY0 BNZI0 S&P/NZX50 Gross Index

Source: Bloomberg Finance L.P.

Page 19

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Key global sovereign indices reflected economic and political news developments through May. Global treasuries moved lower across the board on 4 May, following the latest US interest rate decision and also ahead of the French presidential elections, led by the UK (-0.50%) and German (-0.41%) indices. Global sovereign indices increased sharply on 17 May, led by the US (+0.58%) and UK (+0.50%) indices, as markets reacted to political uncertainty over the US President's sacking of the FBI Chief and Russian ties. On 12 May, the UK sovereign index jumped 0.69% following the latest BOE interest rate decision and latest Inflation Report release, while other global sovereign indices also moved higher, although this reversed the next day (-0.49%). Global sovereign indices moved higher again on 22 May, following the deadly UK terror attack and through late May as markets digested further information from various global leadership meetings and their implications for global policy direction, as well as US political developments. They moved higher again on 25 May, following the release of US monetary policy meeting minutes.

Chart 14. Bloomberg Barclays Global Treasury Indices: May Daily Returns

0.80%

0.60%

0.40%

0.20%

0.00%

Daily ReturnDaily (%) -0.20%

-0.40%

-0.60% 1/5 3/5 5/5 7/5 9/5 11/5 13/5 15/5 17/5 19/5 21/5 23/5 25/5 27/5 29/5 31/5

AU NZ US UK EUR JP DE

Source: Bloomberg Finance L.P.

Page 20

Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Supply

The AusBond Composite Index added A$12.11bn of new supply (issuances and taps) in May. This was 36% higher than the prior month (A$8.9bn), but about 16% lower than the 12-month average (A$14.4bn) and 40% lower than a year ago (A$20.1bn). Treasuries accounted for about 60% of total dollar volume of additions (A$7.2bn), while the Semi Government Index accounted for 11% (A$1.3bn), the Supra Sovereign Index accounted for 12% (A$1.5bn) and the Credit Index accounted for 18% (A$2.1bn). Seven new issues accounted for 13% (A$1.5bn) of the new supply added, while 46 taps accounted for the remaining 87% (A$10.6bn).

The Credit Index continued to dominate new issues, with all seven new issues attributed to the credit space. Caterpillar Financial Australia Ltd issued A$150m of 3-year, single A-rated debt, which priced at 2.69%. In comparison, Toyota Finance Australia Ltd issued $A300m of 5-year debt, which was also single A-rated and priced at 3.13%. Asciano Finance Ltd issued A$250m of 10-year notes, rated BBB- and priced at 5.41%. In the real estate sector, BWP Trust issued A$110m of 5-year notes, rated A- and priced at 3.558%, while Australian Prime Property Fund issued A$200m of 7-year notes, rated A+ and priced at 3.835%. Dexus Finance Pty Ltd also raised A$130m of 10-year debt, rated A- and priced at 4.395%. Westpac Bank’s A$400m 5-year covered bond, rated AAA, priced at 2.938%.

Buybacks and maturities from the AusBond Composite Index in May totalled A$.2.1bn. This was about 30% lower than in April and 65% lower than the prior 12 months, but 32% higher than a year ago. Removals included one called bond in May 9 and one maturity, which removed A$360m from the Credit Index. Fourteen buybacks accounted for the remaining 83% (A$1.7bn) of buybacks by dollar-volume in May. These were dominated by the Treasury and Semi Government Indices, which saw A$801m and A$720m bought back respectively, while Crown Group Finance Ltd’s buyback programme removed A$191m from the Credit Index.

The AusBond Credit FRN Index added A$2.95bn in May, through six new issues and one tap. Six of these transactions were in the banks sector, and were issued at a range of 75 to 135 basis points over BBSW, for terms of 2-years to 5-years. In addition, Asciano Finance Ltd also issued A$100m of 10-year floating rate notes, which were rated BBB-, and priced at BBSW + 260 basis points. Conversely, A$1.3bn was removed from the Credit FRN Index due to two maturities. Separately, the AusBond Inflation Index saw A$150m added to the September 2030 treasury series and no buybacks.

The NZBond Composite Index added NZ$1.17bn of new supply in May. This was accounted for by 3 new issues, totalling A$485m (42%), and 6 taps which totalled NZ$680m (58%). Asia Development Bank issued NZ$250m of AAA-rated 7-year notes at 3.503%. Goodman Property Trust’s subsidiary, GMT Bond Issuer Ltd, issued NZ$100m of 7-year notes, rated BBB+ and priced at 4.540%.The NZ Local Government Funding Agency (NZ LGFA) issued NZ$135m of April 2030 bonds, rated AA+ and priced at 4.507% as well as another NZ$105m through taps. NZ$450m was added to the April 2025 and April 2037 NZ treasury series through taps, while Kommunalbanken Norway added NZ$125m to its August 2025 notes. Conversely, the NZBond Credit Index had two maturities, worth NZ$565m, and a NZ$500m buyback from the December 2017 NZ treasury series. The NZBond Inflation Index had one tap of NZ$100m to the September 2035 NZ treasury series and no buybacks.

9 Removals includes the security AU3CB0221679 that was called on 22 May 2017. Page 21

Sector Apr -17 Mar -17 QTD 12 -mth avg % diff on % diff on (A$bn) (A$bn) (A$bn) (A$bn) prior mth 12 -mth avg Additions Treasury 7.20 4.90 12.10 8.64 46.94% -16.68% Semi Government 1.31 2.02 3.33 2.47 -35.40% -46.98% Non-Government 3.61 1.99 5.60 3.26 81.16% 10.72% Total Composite 12.11 8.91 21.03 14.36 35.88% -15.67% Removals Treasury 0.80 0.40 1.20 2.72 100.27% -70.55% Semi Government 0.72 1.80 2.52 1.60 -60.12% -55.14% Non-Government 0.55 0.73 1.28 1.57 -24.01% -64.98% Total Composite 2.07 2.93 5.00 5.90 -29.28% -64.87% Net new supply Treasury 6.40 4.50 10.90 5.92 42.20% 8.06% Semi Government 0.59 0.22 0.81 0.86 168.10% -31.79% Non-Government 3.05 1.27 4.32 1.68 141.43% 81.52% Total Composite 10.04 5.98 16.02 8.47 67.79% 18.61% Note: Removals include the security AU3CB0221679 that was called on 22 May 2017.

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Maturities and Removals

One security with a face value of A$250m left the AusBond Composite Index for maturity reasons when rebalancing for June 2017. Two securities with a combined face value of A$1.3bn also left the AusBond Credit FRN index for maturity reasons when rebalancing for June 2017 (none for inflation indices).

Table 6. Maturities for AusBond Composite Index: June 2017

Issuer ISIN Value Maturity

VOLKSWAGEN FIN SERV AUST AU3CB0195964 250,000,000 27-Jun-17 Source: Bloomberg Finance L.P.

Seven securities with a combined face value of A$19.29bn are expected to leave the AusBond Composite Index for maturity reasons when rebalancing for July 2017.

Table 7. Upcoming maturities for AusBond Composite Index: July 2017

Issuer ISIN Value Maturity

ASIAN DEVELOPMENT BANK AU0000ATBHJ5 1,200,000,000 5-Jul-17 WESTERN AUST TREAS CORP AU000WT60347 2,329,560,000 15 -Jul -17 HOLCIM FINANCE AUSTRALIA AU3CB0196699 250,000,000 18-Jul-17 CROWN GROUP FINANCE LTD AU3CB0196848 300,000,000 18-Jul-17 AUSTRALIAN GOVERNMENT AU3TB0000127 13,855,572,000 21-Jul-17 INTL FINANCE CORP AU0000IFXHH5 1,150,000,000 26-Jul-17 QIC SHOPPING CENTRE FUND AU3CB0199867 200,000,000 27-Jul-17 Source: Bloomberg Finance L.P.

Two security with a face value of NZ$565m left the NZBond Composite Index for maturity reasons when rebalancing for June 2017 (none for inflation indices). Another two securities worth NZ$1.1bn are expected to exit that index when rebalancing for July 2017.

Table 8. Maturities for NZBond Composite Index: June 2017

Issuer ISIN Value Maturity

ASB BANK LIMITED NZABBDT024C1 315,000,000 8-Jun-17 BANK OF NEW ZEALAND NZBCBDT002C5 250,000,000 30-Jun-17 Source: Bloomberg Finance L.P.

Table 9. Upcoming maturities for NZBond Composite Index: July 2017

Issuer ISIN Value Maturity

TELSTRA CORP LTD NZTCODT102C8 100,000,000 11-Jul-17 ASIAN DEVELOPMENT BANK NZADBDT003C3 1,000,000,000 20-Jul-17 Source: Bloomberg Finance L.P.

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Month in Review 1 June 2017 ///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// Index Market Capitalisation

The AusBond Composite Index ended May 2017 at A$962.91bn, up A$14.08bn (+1.48%) for the month and A$39.51bn (4.28%) for the year to date. This compares with an increase of A$23.05bn (+2.49%) in April.

The NZBond Composite Index stood at NZ$120.03bn at the end of May, up NZ$36m (+0.03%) for the month and NZ$1.65bn (+1.39%) higher for the year to date.

Chart 15. Growth of Bloomberg AusBond Composite Index: 2004 – 2017

1,200

$962.9 1,000 $923.4

800

(A$bn) 600

400

200

0 17 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

May Source: Bloomberg Finance L.P.

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