NZGBS: Closed Cheaper, NZ_US10Y Diff Wider, Light Local Calendar Again Tomorrow

NZGBs closed with benchmarks near session cheaps, yields 2-4bps higher.

• The NZ-US 10-year yield differential widened by 3bps, reversing some of the narrowing that followed the RBNZ’s policy announcement on July 10. This recent narrowing had brought the NZ-US differential to its tightest level since late 2022.
• Outside of the previously outlined Trade balance data, there hasn't been much in the way of domestic drivers to flag.
• NZGBs largely looked through potentially constructive developments abroad, namely richer cash US tsys following President Biden’s announcement that he would not contest the November election and the surprise monetary easing by the PBoC. The PBoC announced a 10bp cut to the 7-day reverse repo rate, along with lower 1yr and 5yr LPRs.
• Swap rates closed 1-2bps higher, with implied swap spreads tighter.
• RBNZ dated OIS pricing closed slightly mixed across meetings, with 2024 meetings little changed and 2025 meetings 2bps softer to 3bps firmer. A cumulative 68bps of easing is priced by year-end.
• Tomorrow, the local calendar is empty.
• On Thursday, the NZ Treasury plans to sell NZ$300mn of the 3.0% Apr-29 bond and NZ$200mn of the 4.50% May-35 bond.