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BONDS: NZGBS: Sharply Richer With US Tsys After Reciprocal Tariff Delay

BONDS
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In local morning trade, NZGBs are 7-8bps richer, tracking US Treasuries, which closed near late-session highs on Thursday, returning to pre-CPI levels from Wednesday despite higher-than-expected PPI data and upward revisions. Market sentiment was supported by the postponement of reciprocal tariffs to early April.

  • The PCE-relevant components of PPI have set the tone with the market's dovish reaction to the release but the aggregate series were still notably stronger than expected. Overall PPI final demand inflation printed at 0.40% m/m sa (cons 0.3) after a heavy upward revision of 0.50% (initial 0.22) in Dec. However, that was partly offset by a downward revised 0.23% (initial 0.38) in Nov.
  • The Performance of Manufacturing Index rose to 51.4 in January from a revised 46.2 in December. The index was above 50 for the first time since February 2023. “While the PMI still sits below its long-run average of 52.5, the improvement is welcome news for manufacturers after a very challenging two years.”: BNZ
  • NZ food prices rose 1.9% m/m in January. Rents +0.1% m/m.
  • Swap rates are 4-7bps lower, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing is slightly softer across meetings. 48bps of easing is priced for February, with a cumulative 115bps by November 2025.
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In local morning trade, NZGBs are 7-8bps richer, tracking US Treasuries, which closed near late-session highs on Thursday, returning to pre-CPI levels from Wednesday despite higher-than-expected PPI data and upward revisions. Market sentiment was supported by the postponement of reciprocal tariffs to early April.

  • The PCE-relevant components of PPI have set the tone with the market's dovish reaction to the release but the aggregate series were still notably stronger than expected. Overall PPI final demand inflation printed at 0.40% m/m sa (cons 0.3) after a heavy upward revision of 0.50% (initial 0.22) in Dec. However, that was partly offset by a downward revised 0.23% (initial 0.38) in Nov.
  • The Performance of Manufacturing Index rose to 51.4 in January from a revised 46.2 in December. The index was above 50 for the first time since February 2023. “While the PMI still sits below its long-run average of 52.5, the improvement is welcome news for manufacturers after a very challenging two years.”: BNZ
  • NZ food prices rose 1.9% m/m in January. Rents +0.1% m/m.
  • Swap rates are 4-7bps lower, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing is slightly softer across meetings. 48bps of easing is priced for February, with a cumulative 115bps by November 2025.