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BONDS: NZGBS: Sharply Cheaper Outright & Relatively After Encouraging QSBO

BONDS
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NZGBs are significantly cheaper on both an outright and a relative basis. Benchmark yields have risen by 10–11bps, with the NZ-US and NZ-AU 10-year yield differentials widening by 9bps and 12bps, respectively. 

  • In contrast, cash US Treasuries and ACGBs are ~1bp richer during today’s Asia-Pacific session. The local market's underperformance appears to be driven by the positive signals from the Q4 NZIER Business Opinion Survey and its influence on OIS pricing, which is tempering expectations for RBNZ easing.
  • To sum up, the survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3.
  • Swap rates are 8-13bps higher, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing is 3-18bps firmer across meetings, with late 2025 leading. 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.
  • Tomorrow, the local calendar is empty.  
  • On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$175mn of the 3.50% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.
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NZGBs are significantly cheaper on both an outright and a relative basis. Benchmark yields have risen by 10–11bps, with the NZ-US and NZ-AU 10-year yield differentials widening by 9bps and 12bps, respectively. 

  • In contrast, cash US Treasuries and ACGBs are ~1bp richer during today’s Asia-Pacific session. The local market's underperformance appears to be driven by the positive signals from the Q4 NZIER Business Opinion Survey and its influence on OIS pricing, which is tempering expectations for RBNZ easing.
  • To sum up, the survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3.
  • Swap rates are 8-13bps higher, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing is 3-18bps firmer across meetings, with late 2025 leading. 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.
  • Tomorrow, the local calendar is empty.  
  • On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$175mn of the 3.50% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.