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NZGBS Slightly Cheaper, Curve Steeper Ahead Of Budget On Thursday

BONDS

in local morning trade, NZGBs are slightly cheaper, with the curve steeper. US cash trading was closed on Monday for memorial day, while US bond futures are a touch higher with the long-end slightly outperforming the US 2y10y curve closed Friday at it's most inverted level for the year.

  • The NZGB curve is steeper, the 2Y +0.6bps at 4.884%, 10Y is +0.7bps at 4.779%. While the US-NZ 2Y swap is -21bps, off yearly highs -5.5bps made earlier this month.
  • NZGBS yields are 15-20bps higher since the hawkish RBNZ last week, with the NZ budget to come on Thursday the RBNZ sent a clear warning they don't want to see anything inflationary.
  • The RBNZ will implement Debt-to-Income (DTI) restrictions starting July 1, limiting high-DTI lending by banks. The restrictions apply to new residential property loans for both owner-occupiers and investors.
  • Filled jobs rose 0.1% m/m in April, vs a revised 0.3% rise in March down from 0.4%. Filled jobs rose to 2.404m from a revised 2.402m
  • Swap rates are unchanged
  • RBNZ dated OIS pricing is unchanged. A cumulative 21bps of easing is priced by year-end.
  • Looking Ahead: ANZ Business Confidence & Activity Outlook On Wednesday
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