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BONDS: NZGBS: Short-End Catch-Up While Long-End Underperforms $-Bloc

BONDS
BulletMarketsFixed Income Bullets

NZGBs closed with a mixed performance and a steeper curve, as the 2-year yield finished 4bps lower, while the 10-year yield rose by 3bps. 

  • Despite today’s gains in the 2-year NZGB, the move appears to be more of a timing adjustment rather than a fundamental shift, especially as swap rates closed flat to 3bps higher, with the 2s/10s curve steepening.
  • Yesterday, swap rates ended flat to 5bps lower, with a steeper 2s/10s curve and significantly tighter implied swap spreads. The rally in NZ swaps reflected positive spillover from ACGBs, which strengthened following weaker-than-expected Q3 GDP data in Australia.
  • In contrast to swaps, the NZGB 2/10 curve exhibited a bear-flattener yesterday, with benchmark yields flat to up 3bps, indicating diverging market dynamics between swaps and government bonds.
  • Compared to the $-bloc, the NZGB 10-year underperformed its counterparts today, with the NZ-US and NZ-AU yield differentials closing 6bps and 3bps wider respectively.
  • RBNZ dated OIS pricing is flat to 5bps softer across meetings. 44bps of easing is priced for February, with a cumulative 104bps by November 2025.
  • Tomorrow, the local calendar is empty, with the next key release being Mfg Activity Volume on Wednesday.
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NZGBs closed with a mixed performance and a steeper curve, as the 2-year yield finished 4bps lower, while the 10-year yield rose by 3bps. 

  • Despite today’s gains in the 2-year NZGB, the move appears to be more of a timing adjustment rather than a fundamental shift, especially as swap rates closed flat to 3bps higher, with the 2s/10s curve steepening.
  • Yesterday, swap rates ended flat to 5bps lower, with a steeper 2s/10s curve and significantly tighter implied swap spreads. The rally in NZ swaps reflected positive spillover from ACGBs, which strengthened following weaker-than-expected Q3 GDP data in Australia.
  • In contrast to swaps, the NZGB 2/10 curve exhibited a bear-flattener yesterday, with benchmark yields flat to up 3bps, indicating diverging market dynamics between swaps and government bonds.
  • Compared to the $-bloc, the NZGB 10-year underperformed its counterparts today, with the NZ-US and NZ-AU yield differentials closing 6bps and 3bps wider respectively.
  • RBNZ dated OIS pricing is flat to 5bps softer across meetings. 44bps of easing is priced for February, with a cumulative 104bps by November 2025.
  • Tomorrow, the local calendar is empty, with the next key release being Mfg Activity Volume on Wednesday.