NZGBS: Short-End Rally Steepens Curve, Equity & USDJPY Weakness Supportive

NZGBs closed on a strong note, with benchmark yields 4bps lower to 1bp higher. The 2/10 curve steepened.

• Given the lack of domestic news flow, equity weakness in today’s Asia-Pac session looks to have assisted short-end outperformance.
• “The New Zealand economy will expand 0.8% in 2024, 2.2% in 2025 and 2.7% in 2026, according to a survey conducted by Bloomberg News. The chance of a recession happening over the next 12 months is 32 per cent, according to 8 respondents.”
• Andrew Vogel, an economist at S&P Global: “New Zealand saw a notable improvement in exports, and slightly better-than-expected growth in private consumption most recently, balanced by weakening fixed investment and still-high import spending. Still, the signs for the underlying strength of the economy are good, and the recession probability is gradually shrinking.” (See link)
• The swap curve has bull-steepened, with rates 1-8bps lower.
• RBNZ dated OIS pricing closed 3-7bps softer across meetings. A 53% chance of a cut in August is priced, with a cumulative 91% priced by October. A cumulative 74bps of easing is priced by year-end.
• Tomorrow, the local calendar is empty again.
• Tomorrow, the NZ Treasury plans to sell NZ$300mn of the 3.0% Apr-29 bond and NZ$200mn of the 4.50% May-35 bond.