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BONDS: NZGBS: Sharply Cheaper, US Tsys & NZ Budget Deficit Weigh

BONDS
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NZGBs closed sharply cheaper although off worst levels, with benchmark yields 5-8bps higher.

  • NZGBs 2bps opened cheaper following a negative lead in from US tsys yesterday. However, the release of the NZ Government’s annual budget extended the selling.
  • The deficit widened by more than forecast as high inflation increased the cost of government services and welfare support. The deficit was NZ$12.85 billion in the year ended June 30, compared to the NZ$11.07 billion projected in the May budget. The deficit grew from NZ$9.45 billion in 2023.
  • Today’s weekly auctions showed mixed results, with cover ratios across the lines ranging from 1.74x (May-34) to 3.10x (May-41).
  • Swap rates closed 2-6bps higher, with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed mixed today but remained 5-15bps softer across meetings out to May-25 than pre-RBNZ levels. 53bps of easing is priced for November (4.22%), with a cumulative 93bps of easing priced for Feb-25 (3.82%) and 152bp by July-25 (3.23%).
  • It is also worth noting that the NZ official rate is now anticipated to be 10bps below Australia’s (4.32%) in November.
  • Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI, Food Prices and Net Migration data. 
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NZGBs closed sharply cheaper although off worst levels, with benchmark yields 5-8bps higher.

  • NZGBs 2bps opened cheaper following a negative lead in from US tsys yesterday. However, the release of the NZ Government’s annual budget extended the selling.
  • The deficit widened by more than forecast as high inflation increased the cost of government services and welfare support. The deficit was NZ$12.85 billion in the year ended June 30, compared to the NZ$11.07 billion projected in the May budget. The deficit grew from NZ$9.45 billion in 2023.
  • Today’s weekly auctions showed mixed results, with cover ratios across the lines ranging from 1.74x (May-34) to 3.10x (May-41).
  • Swap rates closed 2-6bps higher, with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed mixed today but remained 5-15bps softer across meetings out to May-25 than pre-RBNZ levels. 53bps of easing is priced for November (4.22%), with a cumulative 93bps of easing priced for Feb-25 (3.82%) and 152bp by July-25 (3.23%).
  • It is also worth noting that the NZ official rate is now anticipated to be 10bps below Australia’s (4.32%) in November.
  • Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI, Food Prices and Net Migration data.