Yields Firm On TSY Weakness, TD Now Expects RBNZ Hike Next Week

NZ government bond yields finished firmer, around +2-3bps across the benchmarks. There was slight outperformance at the front end, with the 2yr yield up nearly 3bsp to 4.945%.

• In the swap space, the 2yr is modestly higher, last at 5.1850% but this is through Mid Feb highs and back to highs last seen in Nov last year. The 10yr swap rate is 4.63%, nearly 2bps higher, but below earlier Feb highs.
• Markets largely shrugged off the much weaker than expected Q4 NZ CPI print, which fell nearly 2% and saw Q3 revised lower (-0.8% from initially reported as flat).
• A weaker US Tsys backdrop amid on-going Fed talk of push back to earlier rate cuts has likely aided the yield move. Also note Goldman Sachs now expects 4 cuts this year instead of 5 in the US (with the bank no longer expecting a cut in May).
• We also have the RBNZ next week, and headlines crossed from TD Securities with a view change. They now expect that the RBNZ would raise the OCR 25bps next week to 5.75%, and to 6% in May.
• Earlier NZ Finance Minister spoke in Sydney, where she spoke about the NZ Economy where she cast doubt on returning a budget surplus in 2027, and that Higher interest rates are starting to hit with unemployment rising.