NZGBS: Twist-Steepening, 75bps Of Cuts By Year-End

The NZGB curve twist-steepened, with benchmark yields closing 1bp lower to 2bp higher. In the absence of domestic drivers, the move away from the morning’s cheaps appears to have been fueled by a 2-4bp richening in cash US tsys in today’s Asia-Pac session. With news flow light, equity and USDJPY weakness appears to have been in the driving seat.

• The PBoC’s unscheduled lowering of the 1-year MLF rate from 2.5% to 2.3% also likely provided support.
• Today’s weekly supply was adequately absorbed, with cover ratios ranging from 2.16x to 2.59x.
• On a relative basis, the NZ-US and NZ-AU 10-year yield differentials continue to hover around their lowest levels since late 2022 at +16bps and +11bps respectively.
• The 2s10s swaps curve has bull-steepened, with rates flat to 4bps lower.
• RBNZ dated OIS pricing closed relatively stable out to November but showed a 4-11bps softening for 2025 meetings.
• Today’s moves have resulted in a softening across meetings beyond August, ranging from 25 to 71bps compared to pre-RBNZ decision levels.
• A 56% chance of a rate cut in August is currently priced in, with a cumulative 92% chance of a cut by October, before expectations jump sharply to three 25 bps cuts by year-end.
• Tomorrow, the local calendar will see ANZ Consumer Confidence data.