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BONDS: NZGBS: Closed Near Cheaps But Held Bull-Flattener

BONDS
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NZGBs closed near session cheaps. Nevertheless, the market showed a bull-flattener, with benchmark yields 1-5bps lower. The NZ-US 10-year yield differential rose 2bps to -2bps, with the NZ-AU differential unchanged at +9bps.

  • “NZ Treasury Secretary Iain Rennie says the country needs to address its high cost of capital, which is a key driver of its poor productivity growth. Renni identifies "relatively high tax rates on businesses" as part of a policy landscape that discourages investment and the inflow of foreign capital, and suggests focus on four areas to lift productivity growth.” (per BBG)
  • Food prices in NZ rose 1.9% m/m in January, a leap from the 0.1% uptick in December 2024 to mark the highest increase since July 2022. "The proportion of the food basket that increased by over 5% in price was the highest in five years,": StatsNZ
  • Swap rates closed flat to 3bps lower, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing closed slightly softer across meetings today.
  • Notably, OIS pricing is 2–14bps firmer than pre-Q4 Labour Market data levels from February 4. Nevertheless, 48bps of easing is priced for February, with a cumulative 116bps by November 2025.
  • On Monday, the local calendar will see the Performance Services Index and Net Migration data.
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NZGBs closed near session cheaps. Nevertheless, the market showed a bull-flattener, with benchmark yields 1-5bps lower. The NZ-US 10-year yield differential rose 2bps to -2bps, with the NZ-AU differential unchanged at +9bps.

  • “NZ Treasury Secretary Iain Rennie says the country needs to address its high cost of capital, which is a key driver of its poor productivity growth. Renni identifies "relatively high tax rates on businesses" as part of a policy landscape that discourages investment and the inflow of foreign capital, and suggests focus on four areas to lift productivity growth.” (per BBG)
  • Food prices in NZ rose 1.9% m/m in January, a leap from the 0.1% uptick in December 2024 to mark the highest increase since July 2022. "The proportion of the food basket that increased by over 5% in price was the highest in five years,": StatsNZ
  • Swap rates closed flat to 3bps lower, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing closed slightly softer across meetings today.
  • Notably, OIS pricing is 2–14bps firmer than pre-Q4 Labour Market data levels from February 4. Nevertheless, 48bps of easing is priced for February, with a cumulative 116bps by November 2025.
  • On Monday, the local calendar will see the Performance Services Index and Net Migration data.