NZGBS: Twist-Steepens, Weighs A Less Hawkish RBNZ Vs. Higher Longer-Dated Global Yields

NZGBs closed with a twist-steepening of the curve, as the market weighed a slightly less hawkish RBNZ against higher longer-dated US tsy yields. Benchmark yields are 2bps lower to 11bps higher.

• The RBNZ left rates at 5.5%, which was widely expected, and it reiterated its higher-for-longer stance. The outlook “remained similar” to the last meeting implying that as of this month, the RBNZ’s forecasts are unchanged. There was a tweak to the end of the statement saying that policy needs to remain restrictive for “a more sustained period of time” rather than “the foreseeable future”. This may imply that rather than increase rates further, policy may stay tight longer than is currently expected.
• Meanwhile, US tsys have extended overnight weakness in the Asia-Pac session, with yields flat to 5bps higher across benchmarks, a steepening of the curve is evident.
• Swap rates are +/-3bps after the RBNZ decision to be flat to 10bps higher on the day. The 2s10s curve has bear-steepened.
• RBNZ dated OIS pricing is 4-8bps softer across meetings beyond October.
• Tomorrow the local calendar sees ANZ Commodity Prices and Government’s 12-month Financial Statements.
• Tomorrow the NZ Treasury plans to sell NZ$225mn of the 0.25% May-28 bond, NZ$225mn of the 3.50% Apr-33 bond and NZ$50mn of the 1.75% May-41 bond.