Analysts at ANZ explain that one clear theme over recent weeks has been the performance of NZGBs, which despite US Treasury weakness and the local swaps curve steepening, remained firmly bid.
"That saw NZGBs richen on asset swap and clearly outperform on a geographic spread basis (with the NZ 10-year yield now lower than both US and Australia)."
"The emphatically neutral RBNZ stance no doubt assisted, but we suspect so too did an expectation that the supply picture would remain benign."
"Yesterday, the NZDMO announced only a modest lift in its NZGB issuance programme (of $3bn over five years)."
"But in conjunction with reduced T-bill issuance, the ongoing repurchase of the March 2019 (and soon April 2020) nominal bonds, and no new bond syndication – implying a decent lift in the required monthly tender run-rate – we suspect the outperformance of longer-dated NZGBs has now done its dash, with perhaps pressure for the curve to catch up with the steepening seen elsewhere."
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