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NZGBS: Strong Outperformance Versus $-Bloc Has Continued

BONDS

Short-end NZGBs closed near the session's best levels, with the 2-year benchmark yield 1bp lower. The 10-year yield closed 3bps higher. The long end's underperformance likely reflected the ~1bp cheapening in cash US tsys during today’s Asia-Pac session and yesterday’s modest sell-off.

  • Today's move has continued NZGB's strong performance since the RBNZ’s surprising bullish tilt on July 10. NZGB benchmark yields are 27-36bps lower than pre-RBNZ decision levels, with the 2/10 curve 10bps steeper.
  • It also continued NZGB’s outperformance versus its $-bloc counterparts. The NZ-US 10-year yield differential has narrowed by 1bp today to +17bps, its tightest level since late 2022. This differential had oscillated between +20 and +80bps since late 2022.
  • The NZ-AU 10-year yield differential closed 3bps tighter at +8bps, its lowest level since August 2022.
  • The swaps curve twist-steepened, with rates 2bps lower to 3bp higher.
  • RBNZ dated OIS pricing closed with 2025 meetings 4-10bps softer. A cumulative 67bps of easing is priced by year-end.
  • Monday’s local calendar will see Trade Balance data.
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