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BONDS: NZGBS: Strong Outright & Relative Performance

BONDS
BulletMarketsFixed Income Bullets

NZGBs closed showing a bull-steepener, with benchmark yields flat to 3bps lower. The NZGB 10-year has outperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials 5bps tighter on the day. At +9bps, the NZ-US 10-year differential is around its lowest since mid-2021.

  • The market appears to have benefitted from a positive spillover effect from ACGBs, following yesterday’s strong rally in the wake of the RBA decision. The local market was closed at the time of the announcement, amplifying the delayed impact.
  • That said, today’s data was on the weak side. NZ manufacturing volumes fell 1.2% q/q in Q3 versus a revised +0.3% in Q2.
  • Interestingly, Westpac’s forecasting model suggests that the NZ economy appears to be emerging from recession in Q4, with GDP seen to be increasing 0.2%.  (per BBG)
  • Swap rates closed 1-3bps lower, with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed flat to 4bps softer. A cumulative 44bps of easing is priced by February, with 111bps by year-end 2025.
  • Tomorrow, the local calendar will see Card Spending data ahead of BusinessNZ Manufacturing PMI and Net Migration on Friday.
  • Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$225mn of the 4.50% May-35 bond and NZ$25mn of the 2.75% Apr-37 bond.
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NZGBs closed showing a bull-steepener, with benchmark yields flat to 3bps lower. The NZGB 10-year has outperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials 5bps tighter on the day. At +9bps, the NZ-US 10-year differential is around its lowest since mid-2021.

  • The market appears to have benefitted from a positive spillover effect from ACGBs, following yesterday’s strong rally in the wake of the RBA decision. The local market was closed at the time of the announcement, amplifying the delayed impact.
  • That said, today’s data was on the weak side. NZ manufacturing volumes fell 1.2% q/q in Q3 versus a revised +0.3% in Q2.
  • Interestingly, Westpac’s forecasting model suggests that the NZ economy appears to be emerging from recession in Q4, with GDP seen to be increasing 0.2%.  (per BBG)
  • Swap rates closed 1-3bps lower, with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed flat to 4bps softer. A cumulative 44bps of easing is priced by February, with 111bps by year-end 2025.
  • Tomorrow, the local calendar will see Card Spending data ahead of BusinessNZ Manufacturing PMI and Net Migration on Friday.
  • Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$225mn of the 4.50% May-35 bond and NZ$25mn of the 2.75% Apr-37 bond.