BONDS: NZGBS: Bear-Flattens But Outperforms $-Bloc
Nov-14 03:55
NZGBs closed showing a modest bear-flattener, with benchmark yields flat to 2bps higher.
- Cash US tsys are 2-5bps cheaper in today's Asia-Pac session after yesterday's bear-steepener. Renewed scepticism over prospects of a Fed cut in December received a boost from recent commentary from Fed officials.
- NZGBs did, however, outperform their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 4bps and 2bps tighter, respectively. At -28bps, the NZ-AU differential hovers just shy of its cyclical low of -30bps, the most negative since 2020. (see chart)
- Swap rates closed with rates flat to 3bps higher, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed slightly firmer across meetings. 25bps of easing is priced for November, with a cumulative 35bps by February 2026.
- Interest rate expectations across the $-bloc out to mid-2026 have firmed over the past week, with Australia (+9bps), Canada (+9bps), the US (+5bps) and NZ (+2bps).
- (Bloomberg) “The RBNZ will ease mortgage loan-to-value restrictions, effective Dec. 1.”
- On Monday, the local calendar will see the Performance Services Index.
Bloomberg Finance LP
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CHINA: Bond Futures Muted on Small Liquidity Injections
Oct-15 03:45
- China bond futures have done very little today following a second consecutive day of modest liquidity provision during the morning's open market operations.
- The 10-Yr future is down -0.01 at 108.18 as it remains near to the 100-day EMA
- The 2-YR future is down -0.02 at 102.36 to move back below the 20-day EMA of 102.37
- The bond market continues to grind lower in yield with the CGB 10-Yr back at near term lows of 1.83%. It has traded in a tight range of 1.80% - 1.90% for some months, looking for a catalyst to break out. Equity strength and significant regional and central government bond issuance has not put upward pressure on yields despite the PBOC purchase program remaining on hold.
- Next week's GDP may shed light on the next steps for policy, particularly should forecasts prove correct with a moderation in 3Q from 2Q
JGBS AUCTION: 20-Year JGB Auction Results
Oct-15 03:40
The Japanese Ministry of Finance (MOF) sells Y600.3bn 20-Year JGBs:
- Average Yield: 2.674% (prev. 2.654%)
- Average Price: 100.33 (prev. 98.00)
- High Yield: 2.684% (prev. 2.662%)
- Low price: 100.20 (prev. 97.90)
- % Allotted At High Yield: 9.6410% (prev. 98.6020%)
- Bid/Cover: 3.56 (prev. 3.9974x)
JGBS: Futures Steady As 20yr Auction Results Due, Oct JGB Demand Firm
Oct-15 03:10
JGB futures are little changed at 136.31, -.02 versus settlement levels as markets await the 20yr JGB auction result, due in around 30mins. The last 20yr auction, back on Sep 17 went reasonably well with a bid to cover ratio of 3.997 (versus the prior 3.085 outcome). Since the start of Oct, the 10yr and 30yr auction results haven't disappointed the market from a demand standpoint.
- The 20yr bond yield, like other parts of the back end of the curve, spiked after Takaichi was voted as the new LDP leader. However, from highs of 2.75% we have since stabilized, last around 2.70%.
- Political uncertainty continues around who will be the new PM, with headlines crossing a short while ago that the parliamentary committee has failed to agree to hold the new PM election on Oct 21 (which was speculated on yesterday).
- Still the upshot of there is unlikely to be strong fresh fiscal stimulus (and thereby JGB issuance in the near term). Via BBG: "The 20-year auction is expected to go smoothly, supported by the high yield level and the bond’s relative cheapness, he says (Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management Co.)".
- BBG noted: "*JAPAN 20Y GOVT BOND AUCTION MAY HAVE 100.20 LOWEST PRICE:POLL" - BBG".
