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NZGBS: Bull Flattening As US Tsys Partially Reverse Thursday’s Move

BONDS

NZGBs bull-flattened, with benchmark yields flat to 4bps lower. In addition to the previously outlined trade balance data, price action today has likely been influenced by strong demand (cover ratios 2.5x to 3.8x) seen at the weekly supply. Technical issues within the YieldBroker tendering system prompted the NZ Debt Management office to reschedule yesterday's bond auction to today.

  • Nevertheless, today’s intra-session strengthening in NZGBs, particularly for the 10-year, appears linked to a partial reversal of yesterday’s US tsy weakness in today’s Asia-Pacific session. Cash US tsys are 1-5bps richer, with the curve flatter.
  • Swap rates closed 3-4bps lower, with implied swap spreads narrower.
  • RBNZ dated OIS pricing closed 1-5bps softer across meetings. Terminal OCR expectations sit at 5.63%, the lowest level since mid-September and 23bps lower than early October levels.
  • Next week, the local calendar is light until ANZ Consumer Confidence on Friday.
  • Next Thursday, the NZ Treasury plans to sell NZ$200mn of the 4.5% May-27 bond, NZ$200mn of the 3.5% Apr-33 bond and NZ$100mn of the 2.75% May-51 bond.

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