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BONDS: NZGB Curve Steepens, FinMin Pushes For Exemption To US Tariffs

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NZGBs continued the bear-steepening moves throughout the session, with yields closing 2bps to 3.5bps cheaper. New Zealand Finance Minister spoke to Bloomberg earlier, otherwise it has been a slow session, with yields largely tracking moves in us tsys overnight.

  • Fitch Ratings expects NZ councils' operating performance to improve over the medium term due to stable funding from property rates and effective budget balancing rules. However, rising infrastructure spending will lead to higher debt levels, with debt growth outpacing operating balance growth in the near term. Debt metrics are projected to stabilize by fiscal 2028 as rate increases rebalance finances.
  • NZ's FinMin spoke to BBG earlier, where she has instructed diplomats to advocate for exemption from potential US tariffs under President-elect Donald Trump, emphasizing the balanced and valuable trade relationship between the two countries. While New Zealand exports NZ$15.8b annually to the US, including beef, wine, and dairy, Willis is optimistic that tariffs will not target New Zealand given its strong partnership with the US.
  • The 2yr yield jumped earlier, on what seems like very little news it last trades +2.2bps at 3.733% at session highs although it still remains the best performing tenor over the past week. Elsewhere across the curve the 5yr is outperforming today's moves trading +1.7bps at 3.90% while the 10yr is +3.4bps at 4.406%, with the 5s10s +0.7bps at 47.20 just off recent highs of 49.00.
  • The OIS market has 43bps of cuts priced in for the Feb meeting this has held steady most of the week. There is a cumulative 107bps of cuts priced in through to October 2025.
  • Next week the NZ Treasury will release Half-Year Economic & Fiscal Update, followed by GDP on Thursday.
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NZGBs continued the bear-steepening moves throughout the session, with yields closing 2bps to 3.5bps cheaper. New Zealand Finance Minister spoke to Bloomberg earlier, otherwise it has been a slow session, with yields largely tracking moves in us tsys overnight.

  • Fitch Ratings expects NZ councils' operating performance to improve over the medium term due to stable funding from property rates and effective budget balancing rules. However, rising infrastructure spending will lead to higher debt levels, with debt growth outpacing operating balance growth in the near term. Debt metrics are projected to stabilize by fiscal 2028 as rate increases rebalance finances.
  • NZ's FinMin spoke to BBG earlier, where she has instructed diplomats to advocate for exemption from potential US tariffs under President-elect Donald Trump, emphasizing the balanced and valuable trade relationship between the two countries. While New Zealand exports NZ$15.8b annually to the US, including beef, wine, and dairy, Willis is optimistic that tariffs will not target New Zealand given its strong partnership with the US.
  • The 2yr yield jumped earlier, on what seems like very little news it last trades +2.2bps at 3.733% at session highs although it still remains the best performing tenor over the past week. Elsewhere across the curve the 5yr is outperforming today's moves trading +1.7bps at 3.90% while the 10yr is +3.4bps at 4.406%, with the 5s10s +0.7bps at 47.20 just off recent highs of 49.00.
  • The OIS market has 43bps of cuts priced in for the Feb meeting this has held steady most of the week. There is a cumulative 107bps of cuts priced in through to October 2025.
  • Next week the NZ Treasury will release Half-Year Economic & Fiscal Update, followed by GDP on Thursday.