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BONDS: NZGBS: Richer But Off Bests, May-41 Auction Sees Strong Demand

BONDS
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NZGBs closed with a bull-flattening bias, as benchmark yields fell 7–10bps. However, yields ended 2–4bps off their intraday lows, with the 2-year bond showing the largest deviation from its best levels.

  • NZGBs underperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials widening by 1–2bps.
  • The NZ Treasury’s sale of May 2041 bonds recorded the highest bid-to-cover ratio since the security's launch in 2020, climbing to 5.25 from 3.61 at November's auction. This improvement followed the recent rise in its yield, boosting investor interest.
  • Monthly price indicators released today suggest NZ inflation remains contained, even as there are signs that price momentum may have bottomed out. Nevertheless, the data indicates potential downside risks to the RBNZ’s inflation projections.  
  • Swap rates closed 4-7bps lower, with the 2s10s curve flatter.
  • RBNZ-dated OIS pricing closed 1–5bps softer across meetings today, with late 2025 leading the decline. 47bps of easing is priced for February, with a cumulative 108bps by November 2025.
  • Despite today’s softness, ois pricing remains 4–25bps firmer compared to pre-US Payrolls levels last Friday.
  • Tomorrow, the local calendar will see the BusinessNZ Manufacturing PMI.
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NZGBs closed with a bull-flattening bias, as benchmark yields fell 7–10bps. However, yields ended 2–4bps off their intraday lows, with the 2-year bond showing the largest deviation from its best levels.

  • NZGBs underperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials widening by 1–2bps.
  • The NZ Treasury’s sale of May 2041 bonds recorded the highest bid-to-cover ratio since the security's launch in 2020, climbing to 5.25 from 3.61 at November's auction. This improvement followed the recent rise in its yield, boosting investor interest.
  • Monthly price indicators released today suggest NZ inflation remains contained, even as there are signs that price momentum may have bottomed out. Nevertheless, the data indicates potential downside risks to the RBNZ’s inflation projections.  
  • Swap rates closed 4-7bps lower, with the 2s10s curve flatter.
  • RBNZ-dated OIS pricing closed 1–5bps softer across meetings today, with late 2025 leading the decline. 47bps of easing is priced for February, with a cumulative 108bps by November 2025.
  • Despite today’s softness, ois pricing remains 4–25bps firmer compared to pre-US Payrolls levels last Friday.
  • Tomorrow, the local calendar will see the BusinessNZ Manufacturing PMI.