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BONDS: NZGBS: Cheaper But NZ-US 10Y Diff. Near YTD Low

BONDS
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NZGBs closed mid-range, with benchmark yields 2-3bps higher. Yields were 5bps higher early in the session as the local market played catch-up to the sell-off in US tsys after yesterday’s Labour Day holiday. 

  • The move away from session cheaps was aided by cash US tsys, which are ~1bps richer in today’s Asia-Pac session. After a slow start to the week, US data and newsflow are set to heat up with ADP Jobs and PCE Deflator data on Wednesday and Non-Farm Payrolls for October on Friday. There is also a heavy corporate earnings docket. Next Tuesday's presidential election will also likely keep some trading accounts on the sidelines.
  • Notably, the NZGB 10-year has outperformed its US counterpart, with the NZ–US yield spread narrowing by 6bps since Friday’s close to reach +17bps. This places the differential just above July's low of +13bps, the narrowest level since mid-2021.
  • Swap rates closed 3-4bps higher.
  • RBNZ dated OIS pricing closed flat to 3bps firmer across meetings. A cumulative 99bps of easing is priced by February, with 54bps by year-end.
  • Tomorrow, the local calendar is empty.
  • On Thursday, the NZ Treasury plans to sell NZ$175mn of the 3.0% Apr-29 bond, NZ$250mn of the 4.25% May-34 bond and NZ$75mn of the 1.75% May-41 bond.
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NZGBs closed mid-range, with benchmark yields 2-3bps higher. Yields were 5bps higher early in the session as the local market played catch-up to the sell-off in US tsys after yesterday’s Labour Day holiday. 

  • The move away from session cheaps was aided by cash US tsys, which are ~1bps richer in today’s Asia-Pac session. After a slow start to the week, US data and newsflow are set to heat up with ADP Jobs and PCE Deflator data on Wednesday and Non-Farm Payrolls for October on Friday. There is also a heavy corporate earnings docket. Next Tuesday's presidential election will also likely keep some trading accounts on the sidelines.
  • Notably, the NZGB 10-year has outperformed its US counterpart, with the NZ–US yield spread narrowing by 6bps since Friday’s close to reach +17bps. This places the differential just above July's low of +13bps, the narrowest level since mid-2021.
  • Swap rates closed 3-4bps higher.
  • RBNZ dated OIS pricing closed flat to 3bps firmer across meetings. A cumulative 99bps of easing is priced by February, with 54bps by year-end.
  • Tomorrow, the local calendar is empty.
  • On Thursday, the NZ Treasury plans to sell NZ$175mn of the 3.0% Apr-29 bond, NZ$250mn of the 4.25% May-34 bond and NZ$75mn of the 1.75% May-41 bond.