BONDS: NZGBS: Richer But Mid-Range

NZGBs closed mid-range, with benchmark yields 3-6bps lower and the 2/10 curve steeper. 

• The key data today was CoreLogic house values. NZ’s housing market began to recover in H2 '23 with a pickup in transactions and prices, but it has been deteriorating again over 2024 as affordability remains stretched and sentiment soft. Residential building consents are on the RBNZ’s list of higher frequency indicators, and they remain weak, weighing on overall growth. A further deterioration in residential property could drive larger-than-expected monetary easing.
• Unlike Australia, increased demand from immigration doesn’t appear to have sustainably boosted house prices. Like Australia though, it has put pressure on rents with NZ Q2 CPI rents +4.8% y/y, the highest rate since the series began in 2000.
• Today’s weekly supply saw adequate demand, with cover ratios ranging from 1.86x (may-34) to 2.61x (May-30) across the lines.
• Cash US tsys are ~1bp cheaper across benchmarks in today’s Asia-Pac session after yesterday’s solid post-data rally.
• Swap rates closed 3-7bps lower.
• RBNZ dated OIS pricing closed 2-7bps softer, led by mid-2025 meetings. A cumulative 77bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Q2 Volume of All Buildings data.