BONDS: NZGBS: Slight Bear-Steepener, NZ Treasury Cuts Econ & Fiscal Forecasts

NZGBs closed flat to 2bps cheaper after a subdued data-light session of dealings.

• NZ Treasury said it would likely cut its economic and fiscal forecasts because of a sustained productivity slowdown in the economy. The May budget’s forecasts had anticipated a return to economic growth in the second half of 2024, but the latest data suggests the recovery will begin later, Treasury Chief Economic Adviser Dominick Stephens said in a speech. (per Reuters)
• Today’s supply showed mixed results across the cash lines, with cover ratios ranging from 1.71x (May-32) to 4.17x (Apr-29).
• Swap rates closed flat to 3bps higher, with the 2s10s curve steeper.
• The case for another sizable RBNZ rate cut next week is almost as strong as it was in October and at present remains the “path of least regret,” according to ASB Bank. RBNZ will lower its OCR by a further 50bp to 4.25% on Nov. 27, bringing it closer to the more neutral level which is in a rough 3-4% range, economists Nick Tuffley and Mark Smith write in note.
• RBNZ dated OIS pricing is flat to 2bps firmer. A cumulative 92bps of easing is priced by February, with 52bps by year-end.
• The local calendar is light for the remainder of the week. The next key release will be Q3 Retail Sales ex Inflation on Monday.