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NZGBS: Slightly Cheaper, US Tsys Pressured By Another Poor Auction & EGBs

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In local morning trade, NZGBs are 2bps cheaper after another heavy session for US tsys. The FOMC's high-for-longer stance and another poor auction weighed on the market.

  • The 7y note auction extended a string of weak sales this week, as the 7y tailed by 1.3bps (awarded at 4.650% vs. WI of 4.637%). The bid-to-cover marked the lowest outright demand in a year.
  • There was also spillover from weakness in EGBs after stronger German inflation and wage data. German 10-year bunds closed 10bps higher at 2.69%.
  • Swap rates are 1-3bps higher.
  • RBNZ dated OIS pricing is little changed for meetings out to Feb-25 and slightly softer beyond. A cumulative 16bps of easing is priced by year-end.
  • Building Permits fell 1.9% m/m in April versus -0.2% in March.
  • NZ’s government will present its first budget today. It promised tax cuts in the election but has been clear that it has found spending reductions to maintain fiscal responsibility. The timing of both will be important to the RBNZ.
  • NZ Debt Management announced the joint lead managers for the syndicated tap of the 15 May 2028 nominal bond yesterday. The start of next week is a potential window for the transaction launch. The weekly government bond tender has been delayed till tomorrow due to today’s Budget.
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In local morning trade, NZGBs are 2bps cheaper after another heavy session for US tsys. The FOMC's high-for-longer stance and another poor auction weighed on the market.

  • The 7y note auction extended a string of weak sales this week, as the 7y tailed by 1.3bps (awarded at 4.650% vs. WI of 4.637%). The bid-to-cover marked the lowest outright demand in a year.
  • There was also spillover from weakness in EGBs after stronger German inflation and wage data. German 10-year bunds closed 10bps higher at 2.69%.
  • Swap rates are 1-3bps higher.
  • RBNZ dated OIS pricing is little changed for meetings out to Feb-25 and slightly softer beyond. A cumulative 16bps of easing is priced by year-end.
  • Building Permits fell 1.9% m/m in April versus -0.2% in March.
  • NZ’s government will present its first budget today. It promised tax cuts in the election but has been clear that it has found spending reductions to maintain fiscal responsibility. The timing of both will be important to the RBNZ.
  • NZ Debt Management announced the joint lead managers for the syndicated tap of the 15 May 2028 nominal bond yesterday. The start of next week is a potential window for the transaction launch. The weekly government bond tender has been delayed till tomorrow due to today’s Budget.