NZGBs Under Modest Pressure Post-Bailey

NZGB yields have nudged higher during early Wednesday trade, with the impact of the BoE’s early Tuesday attempt to reassure markets by adding inflation-link gilts to its short-term purchase scheme undone by BoE Governor Bailey underscoring the idea that the BoE’s purchases will end as scheduled, in very blunt terms, late in the day (after the Gilt market closed).

• Bailey’s comments weighed on U.S. Tsys & equities and supported the broader USD.
• The major NZGB benchmarks run 2.5-3.5bp cheaper across the curve.
• 2-Year swap rates operate around the cycle high registered yesterday.
• REINZ house price data continued to punctuate the impact of higher interest rates.
• Note that the RBNZ has declared that it will repurchase NZGB Apr-23 ahead of maturity, as part of its standard liquidity management operations. The repurchase offer opens on 17 Oct.
• The Bank has also noted that it has received the first round of consultations re: its monetary policy remit review, with advice on the scope of the review passed to the Minister of Finance. The second round of consultation is expected to conclude by early next year, which will help finalise advice given to the Minster.
• Net migration rounds off Wednesday’s domestic docket but shouldn’t impact the space. Watch for any trans-Tasman impact on the back of the impending RBA communique.