NZGBS: Outperformance Noted, Index Inclusion Eyed

NZGBs richened on Friday, outperforming their major global counterparts, with focus on next month’s WGBI index inclusion seemingly at the fore.

• An element of short covering ahead of the long NZ weekend may also have been in play, with NZ markets closed on Monday as the country observes the Labor Day holiday.
• Note that a move lower in core global FI markets (higher yields) came after the local close.
• Swap spreads were generally a little wider across the curve, with some receiver side flows in swaps probably helping the bid in NZGBs in the second half of the day.
• RBNZ dated OIS continue to price a terminal rate of just over 5.40%.
• Local data had little impact on the space, with a marginal monthly uptick in credit card spending observed, while Sep trade balance data revealed a fourth consecutive monthly trade deficit, albeit narrowing a touch from the record deficit witnessed in August.