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BONDS: NZGBs Closed Cheaper, Ranges Narrow Ahead Of RBNZ Wednesday

BONDS
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NZGBs closed just off session's worst levels, yields were 2-6bps cheaper. The moves were largely just on the back of the sell-off in US tsys following Friday's much stronger-than-expected US Non-farm payrolls. RBNZ dated OIS firmed throughout the session.

  • There was no economics data out of the region today, with all eyes turning to the RBNZ on Wednesday, BBG consensus is for a 50bps cut, in line with current OIS pricing.
  • RBNZ's Governor Orr has made some comments about the 2023-24 Annual report, “Core inflation and most measures of inflation expectations have declined, and the risks to the inflation outlook have become more balanced” and reiterated the annual CPI is expected to return to the 1-3% target range by year-end. So far the report doesn't seem to have been released publicly.
  • New Zealand's official reserve assets slightly declined to NZ$32.54b in September from NZ$32.57b in August. Foreign currency reserves, including other reserve assets, fell to NZ$24.7b from NZ$25.18b, while reserves held in the Treasury increased to NZ$7.84b from NZ$7.4b. The country's special drawing rights also dipped to NZ$4.62b in September from NZ$4.65b in August, per RBNZ.
  • NZGB curve has bear-flattened today with most of the move coming on the open, we traded in narrow ranges throughout the session and with Sydney out for a Public Holiday volumes were low. The 2yr closed +5.5bps at 3.838%, while the 10yr closed +4.6bps at 4.299%
  • RBNZ Dated OIS is pricing 42.8bps of cuts or a 71% chance of a 50bps cut on Wednesday and 92.5bps of cuts by the November 27th meeting.  
  • Swaps are 6-8.5bps higher across the curve with the 2-3yr tenors underperforming.
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NZGBs closed just off session's worst levels, yields were 2-6bps cheaper. The moves were largely just on the back of the sell-off in US tsys following Friday's much stronger-than-expected US Non-farm payrolls. RBNZ dated OIS firmed throughout the session.

  • There was no economics data out of the region today, with all eyes turning to the RBNZ on Wednesday, BBG consensus is for a 50bps cut, in line with current OIS pricing.
  • RBNZ's Governor Orr has made some comments about the 2023-24 Annual report, “Core inflation and most measures of inflation expectations have declined, and the risks to the inflation outlook have become more balanced” and reiterated the annual CPI is expected to return to the 1-3% target range by year-end. So far the report doesn't seem to have been released publicly.
  • New Zealand's official reserve assets slightly declined to NZ$32.54b in September from NZ$32.57b in August. Foreign currency reserves, including other reserve assets, fell to NZ$24.7b from NZ$25.18b, while reserves held in the Treasury increased to NZ$7.84b from NZ$7.4b. The country's special drawing rights also dipped to NZ$4.62b in September from NZ$4.65b in August, per RBNZ.
  • NZGB curve has bear-flattened today with most of the move coming on the open, we traded in narrow ranges throughout the session and with Sydney out for a Public Holiday volumes were low. The 2yr closed +5.5bps at 3.838%, while the 10yr closed +4.6bps at 4.299%
  • RBNZ Dated OIS is pricing 42.8bps of cuts or a 71% chance of a 50bps cut on Wednesday and 92.5bps of cuts by the November 27th meeting.  
  • Swaps are 6-8.5bps higher across the curve with the 2-3yr tenors underperforming.