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BONDS: NZGBS: Richer After Q4 CPI, Outperforms $-Bloc

BONDS
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NZGBs closed 1-2bps richer but off session bests.

  • Nevertheless, NZGBs have outperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 5-6bps tighter on the day.
  • Q4 NZ CPI was close to Bloomberg consensus expectations at 0.5% q/q and 2.2% y/y after 0.6% & 2.2% in Q3, above the RBNZ’s November forecast of 0.4% & 2.1%.
  • The RBNZ’s sector factor model estimate of Q4 core inflation eased 0.2pp to 3.1% y/y, close to the top of the 1-3% target band. Q3 was revised down 0.1pp to 3.3%. Given that headline CPI was impacted by volatile components such as airfares, the move lower in underlying inflation is good news and another 50bp rate cut in February remains the base case. But underlying non-tradeables inflation is proving sticky and will continue to be watched closely.
  • Swap rates closed mixed, with the 2-year and 5-year 1bp lower and the 10-year 1bp higher.
  • RBNZ dated OIS pricing closed 1-5bps softer across meetings, flat to 3bps softer than pre-CPI levels. 47bps of easing is priced for February, with a cumulative 112bps by November 2025.
  • Tomorrow, the local calendar will see Net Migration data and the NZ Government’s 5-month Financial Statements.
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NZGBs closed 1-2bps richer but off session bests.

  • Nevertheless, NZGBs have outperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 5-6bps tighter on the day.
  • Q4 NZ CPI was close to Bloomberg consensus expectations at 0.5% q/q and 2.2% y/y after 0.6% & 2.2% in Q3, above the RBNZ’s November forecast of 0.4% & 2.1%.
  • The RBNZ’s sector factor model estimate of Q4 core inflation eased 0.2pp to 3.1% y/y, close to the top of the 1-3% target band. Q3 was revised down 0.1pp to 3.3%. Given that headline CPI was impacted by volatile components such as airfares, the move lower in underlying inflation is good news and another 50bp rate cut in February remains the base case. But underlying non-tradeables inflation is proving sticky and will continue to be watched closely.
  • Swap rates closed mixed, with the 2-year and 5-year 1bp lower and the 10-year 1bp higher.
  • RBNZ dated OIS pricing closed 1-5bps softer across meetings, flat to 3bps softer than pre-CPI levels. 47bps of easing is priced for February, with a cumulative 112bps by November 2025.
  • Tomorrow, the local calendar will see Net Migration data and the NZ Government’s 5-month Financial Statements.