NZGBS: Closed At Best Levels, Tracking Richening In Global Bonds

NZGBs closed at the session’s best levels, with benchmark yields 2-5bp lower. Given the absence of significant domestic events, local market participants appeared to turn their attention overseas for guidance. US tsys, JGBs and ACGBs all displayed strength during the Asia-Pac session.

• US tsys extended their post-CPI gains, resulting in benchmark yields decreasing by 1-2bps. JGBs also exhibited a robust performance, bolstered by a successful 20-year bond auction.
• Meanwhile, ACGBs strengthened despite employment data surpassing expectations, with a contributing factor being data related to composition that leaned towards the weaker side.
• NZ-US and NZ-AU 10-year yield differentials closed largely unchanged on the day.
• Today’s weekly auction saw mixed results, with the May-31 bond seeing a cover ratio of around 3.00x, while the May-26 and May-41 bonds saw cover of around 2.00x.
• Swap rates are 1-4bp lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed flat to 1bp firmer across meetings, with terminal OCR expectations steady at 5.62%.
• The RBNZ’s total assets increased for a second month in August led by foreign currency investments and cash balances, according to an update on the central bank website. (See link)
• Tomorrow the local calendar sees BusinessNZ Manufacturing PMI for August.