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NZGBS: Closed On A Strong Note, August Cut Priced As A Coin Toss

BONDS

NZGBs closed on a strong note, with benchmark yields 6-7bps lower and the 2/10 curve flatter.

  • Outside of the previously outlined home values, there hasn't been much in the way of domestic drivers to flag.
  • Today’s weekly supply saw solid absorption across all the lines, with the Apr-37 bond the standout performer. Its cover ratio was 6.32x versus 3.16x at its 18 July auction.
  • The NZ-US 10-year yield differential remains unchanged, with cash US Treasuries approximately 2bps cheaper in today’s Asia-Pacific session following yesterday’s strong post-FOMC rally. Meanwhile, the NZ-AU 10-year differential has tightened by 4bps to +20bps, following yesterday’s strong post-Jobs outperformance by ACGBs.
  • Swap rates closed 4-5bps lower, with implied swap spreads wider.
  • RBNZ dated OIS pricing closed 2-7bps softer across meetings beyond October, with mid-2025 leading. The market gives a 25bp cut in August a 53% probability. A cumulative 74bps of easing is priced by year-end.
  • Tomorrow, the local calendar is empty.

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