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NZGBS: Richer After The Budget

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NZGBs closed with a bull-steepening after yields fell 2-4bps following the release of the NZ Budget.

  • The new NZ government presented its first budget and delivered the income tax cuts promised in the 2023 election. Finance minister Willis said that the cuts worth $14.7bn over 4 years would be offset fully by “savings and revenue initiatives” thus not adding to inflationary pressure. Slower growth has contributed to the deterioration in the budget position.
  • The timing of measures is important to the RBNZ and the reduction in spending seems to be mainly from FY26, whereas tax policy changes will begin from FY25, which may concern them.
  • The Treasury projects net debt to 41.8% of GDP by 2028 vs 37.6% in December. Concurrently, NZ is increasing its bond program by NZ$12 billion over the same period.
  • The swaps curve also bull-steepened, with rates 1-4bps lower.
  • RBNZ dated OIS pricing closed little changed for meetings out to Nov-24 and 2-5bps softer beyond. A cumulative 17bps of easing is priced by year-end.
  • Tomorrow, the local calendar is empty apart from the NZ Treasury’s planned sale of NZ$275mn of the 1.5% May-31 bond, NZ$175mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.
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NZGBs closed with a bull-steepening after yields fell 2-4bps following the release of the NZ Budget.

  • The new NZ government presented its first budget and delivered the income tax cuts promised in the 2023 election. Finance minister Willis said that the cuts worth $14.7bn over 4 years would be offset fully by “savings and revenue initiatives” thus not adding to inflationary pressure. Slower growth has contributed to the deterioration in the budget position.
  • The timing of measures is important to the RBNZ and the reduction in spending seems to be mainly from FY26, whereas tax policy changes will begin from FY25, which may concern them.
  • The Treasury projects net debt to 41.8% of GDP by 2028 vs 37.6% in December. Concurrently, NZ is increasing its bond program by NZ$12 billion over the same period.
  • The swaps curve also bull-steepened, with rates 1-4bps lower.
  • RBNZ dated OIS pricing closed little changed for meetings out to Nov-24 and 2-5bps softer beyond. A cumulative 17bps of easing is priced by year-end.
  • Tomorrow, the local calendar is empty apart from the NZ Treasury’s planned sale of NZ$275mn of the 1.5% May-31 bond, NZ$175mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.