As a reminder, the Government auctions this year have the goal of keeping the price below $70.00; the market obviously has a different view, and has gratefully accepted the 6,131,700 units auctioned on Wednesday and willingly paid 8.5% above the price the Government was trying to contain the price to.

The price paid is above the Q1 (March) auction, which cleared at $70 flat.

While Wednesday's auction saw lower overall levels of participation than in Q1, a greater proportion or participants will be disappointed.  9 of the 26 participants were unsuccessful in procuring some volume.  They will have to attempt to get this volume at the next two auctions or on the secondary market.  Remember many of the participants are emitters who must surrender NZU’s at the end of the year due to their emissions.

The next two auctions will only have 4.825m units available to auction.  As a reminder, the last two auctions sold 6.1m units and 10.5m units in the Q1 auction.  Time and units are running out for emitters.   

Since the auction the NZU price has moved to $76.85 on the secondary market.

What we find remarkable is this auction was so strong while at the same time sharemarkets and most other investments are heading South.  Nothing is a sure thing, but the market seems very confident the NZU price will continue to rise.

The next auction is September the 9th.  We will watch with interest.