NZGBS: Cheaper, Outperforms The $-Bloc, Syndicated Tap Of Apr-33 Bond

NZGBs closed weaker but off cheaps with benchmark yields 5-6bp higher after the NZ Treasury sells an additional NZ$5.0bn of the nominal 14 April 2033 bond via syndicated tap. The bonds, which carry a coupon of 3.50%, were issued at a spread of 4bp over the 15 May 2032 nominal bond, at a yield to maturity of 4.7575%. Total book size, at final price guidance, exceeded NZ$12.2bn. Today’s tap led to the cancellation of the scheduled tender.

• The cash line richened 2.5bp in post-tap trade, more than unwinding the pre-announcement cheapening.
• While pressured by US tsys and ACGBs in local trade, NZGBs have outperformed with the NZ/US and the NZ/AU 10-year yield differentials respectively 5bp and 7bp tighter.
• Swap rates closed 5-10bp higher with the 2s10s curve steeper and implied swap spreads wider.
• RBNZ dated OIS pricing closed 6-8bp firmer for meetings beyond Nov'23.
• (AFR) While the RBNZ is widely viewed as having reached its interest rate peak, the central bank increasingly is expected to hold the cash rate at its current level well into next year, perhaps even until mid-2024. (See link)
• The local calendar is light tomorrow with the focus turning to the RBNZ policy decision on Wednesday.