NZGBS: Cheaper, Post-RBNZ Rally Continues To Be Pared

NZGBs closed 1-6bps cheaper and well off the session’s best levels.

• With today’s domestic data drop 2^nd tier, the drift away from the best levels in part reflects the digestion of today’s NZ$6bn issue of a new May 2036 bond via syndication. It was issued at a spread of 9bps over the May-35 bond for a yield-to-maturity of 4.365%. Total book size at final price guidance exceeded NZ$22.7bn.
• Nevertheless, with the short-end underperforming, today's price action also reflects profit-taking after the strong post-RBNZ decision rally. Nevertheless, NZGBs remain 2-14bps richer, with the 2/10 curve 12bps steeper.
• NZ Treasury’s Fortnightly Economic Update stated that labour market data “revealed the impact of the reduced demand and production that occurred during the June quarter with an increase in the unemployment rate and a drop in hours worked and hours paid.”
• “Firms are reducing hours but there is a limit to their abilities to maintain employee levels with ongoing wage inflation, pointing to further market softening.” (per BBG)
• Swap rates closed 4-7bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed 2-14bps firmer across meetings, with mid-2025 leading. A cumulative 69bps of easing is priced by year-end.
• Tomorrow, the local calendar is empty.