NZGBS: Marginal Steepening, Robertson Lays Out Rough Guideline For Rebuild Cost

NZGBS sit a touch steeper in early trade, with the major benchmarks cheapening by 2-4bp on the back of the previously outlined cheapening in the U.S. Tsy space on Thursday. Swap rates have generally tracked NZGB yields higher, leaving swap spreads little changed.

• Locally, Finance Minister Robertson has earmarked a rough NZ$9-10bn rebuild cost for Cyclone Gabrielle, although he pointed to that being spread over “many years”, also telling BBG that he wanted to minimise the amount of borrowing deployed when it comes to funding the spending. Robertson pointed to a want to explore all options re: paying for the rebuild, with an eye on diverting funding surrounding existing fiscal schemes. He also suggested that the inflationary burden of the rebuild will be a little more limited than some think, owing to the longer term nature of the government’s plans. Finally, Robertson conceded that it is possible that NZ is already in a technical resilience, but pointed to various areas of economic resilience that he hoped would result in a shallow and short-lived recession (in the case that scenario is realised).
• When it comes to RBNZ pricing, RBNZ-dated OIS continues to show 20bp of tightening for the Bank’s next meeting, while terminal OCR pricing continues to hover just below 5.50%.
• Manufacturing PMI data headlines the local docket on Friday.