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BONDS: NZGBS: Twist-Steepener After Weak Q3 GDP

BONDS
BulletAPACFixed Income BulletsJapanMarkets

NZGBs closed showing a twist-steepener, with benchmark yields 7bps lower to 4bps higher, after today’s weak Q3 GDP print.

  • NZ-US and NZ-AU 10-year yield differentials closed 8bp and 7bps tighter respectively, with the former at its lowest level since early 2021.
  • Cash US tsys are slightly mixed, with a steepening bias, in today’s Asia-Pac session after yesterday’s aggressive post-FOMC sell-off.
  • Q3 NZ GDP printed significantly below consensus, the RBNZ’s November forecast of -0.2% q/q and domestic banks' predictions of -0.4%. The production-based measure fell 1% q/q after a downwardly revised Q2 of -1.1%, leaving the annual rate 1.5% y/y lower.
  • There are still Q3 CPI (January 22) and jobs/wages (February 5) to come, but with data like this another 50bp rate cut looks likely on February 19.
  • However, the ANZ business survey continued to sound a more positive note with the outlook rising to 50.3 from 48.0 in December. Business confidence was down moderately to 62.3 from 64.9, but remains elevated.
  • Swap rates closed with rates 6bps lower to 3bps higher.
  • RBNZ dated OIS pricing closed 5-13bps softer across meetings, with May 2025 leading. 50bps of easing is priced for February, with 117bps by year-end 2025.
  • Tomorrow, the local calendar will see ANZ Consumer Confidence and Trade Balance data.
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NZGBs closed showing a twist-steepener, with benchmark yields 7bps lower to 4bps higher, after today’s weak Q3 GDP print.

  • NZ-US and NZ-AU 10-year yield differentials closed 8bp and 7bps tighter respectively, with the former at its lowest level since early 2021.
  • Cash US tsys are slightly mixed, with a steepening bias, in today’s Asia-Pac session after yesterday’s aggressive post-FOMC sell-off.
  • Q3 NZ GDP printed significantly below consensus, the RBNZ’s November forecast of -0.2% q/q and domestic banks' predictions of -0.4%. The production-based measure fell 1% q/q after a downwardly revised Q2 of -1.1%, leaving the annual rate 1.5% y/y lower.
  • There are still Q3 CPI (January 22) and jobs/wages (February 5) to come, but with data like this another 50bp rate cut looks likely on February 19.
  • However, the ANZ business survey continued to sound a more positive note with the outlook rising to 50.3 from 48.0 in December. Business confidence was down moderately to 62.3 from 64.9, but remains elevated.
  • Swap rates closed with rates 6bps lower to 3bps higher.
  • RBNZ dated OIS pricing closed 5-13bps softer across meetings, with May 2025 leading. 50bps of easing is priced for February, with 117bps by year-end 2025.
  • Tomorrow, the local calendar will see ANZ Consumer Confidence and Trade Balance data.