NZGBS: Bear Steepening In Line With US Tsy Move, US Tsy Supply Weighs

In local morning trade, NZGBs are flat to 9bps cheaper after the US tsys curve bear-steepened, a move prompted by expectations of next week's announcements regarding larger auction sizes, coupled with lacklustre demand metrics witnessed at the US$52bn 5-year note auction. Additionally, the sell-off was bolstered by unexpectedly robust data on new home sales.

• The US tsy 10-year yield rose 13bps to 4.96%.
• The BOC held rates steady at 5.0% for the third consecutive meeting but retained a tightening bias. It also noted upside risks to inflation had increased.
• Swap rates are 4-8bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is little changed, with terminal OCR expectations at 5.60%.
• RBNZ comments in an extract from the Financial Stability Report, due for release on Nov. 1, noted that “Whilst defaults in banks’ agricultural lending portfolios are currently low, they are expected to increase and could accelerate if there is a prolonged period of high costs and low prices”. (See link)
• Today, the local calendar is empty, ahead of ANZ Consumer Confidence tomorrow.
• Today, the NZ Treasury plans to sell NZ$200mn of the 4.5% Apr-27 bond, NZ$200mn of the 3.5% Apr-33 bond and NZ$100mn of the 2.75% May-51 bond.