NZGBS: Closed With A Significant Bull-Flattening Price Indices Data

NZGBs have bull-flattened into the close of the local session, with yields flat to 9bps lower. After dealing in narrow ranges for much of the session, 5-10-year NZGBs rallied 5-7bps after Statistics NZ reported price indexes for selected goods and services for November.

• Food, fuel and alcohol prices, comprising ~27% of CPI, rose at a slower annual pace.
• The strengthening of the market was aided by downward revisions from sell-side banks. Westpac NZ economists cut their forecast for Q4 CPI inflation. Westpac now sees CPI rising 0.3% q/q versus the previous projection of 0.6%. Separately, ASB Bank said that the selected price index data suggested annual inflation through November had slowed. “Prices were down 0.5% in November, with annual inflation a smidgen below 5%... and consistent with our core view that there is considerable downside risk to the 5.0% y/y RBNZ pick”.
• Swap rates closed 11-13bps lower, with the 5-year outperforming.
• RBNZ dated OIS pricing is 4-11bps softer across meetings beyond Apr’24, with Nov’24 leading. The market now has 65bps of easing priced by Nov’24.
• Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 4.5% May-30 bond, NZ$225mn of the 3.5% Apr-33 bond and NZ$75mn of the 2.75% May-51 bond.