BONDS: NZGBS: Strong Relative Performance Ahead Of US Payrolls

NZGBs closed 4-6bps cheaper across benchmarks. 

• NZGBs showed a mixed relative performance: the NZ–US 10-year yield differential widened by 3bps, while the NZ–AU differential narrowed by 3bps. As the chart shows, the NZ–AU spread is now hovering near its lowest level since 2020.
• Cash US tsys are ~1bp richer in today's Asia-Pac session ahead of today's FOMC policy decision.
• RBNZ Governor Anna Breman said today that monetary policy has no preset path and will change if the inflation outlook shifts. She emphasised the importance of assessing new data ahead of the next meeting and noted that global developments will also factor into policy decisions.
• Swap rates closed 4-9bps higher, led by the 5-year.
• RBNZ-dated OIS pricing closed firmer across meetings. 1bp of tightening is priced for February, while November 2026 assigns 63bps of tightening.
• Tomorrow, the local calendar will see Mfg Activity Volume data.
• On Thursday, the NZ Treasury plans to sell NZ$175mn of the 4.50% May-30 bond, NZ$200mn of the 3.50% Apr-33 bond and NZ$75mn of the 5.00% May-54 bond.

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Gold & silver have held onto Tuesday’s gains during Wednesday’s APAC trading ahead of the Fed decision later. They have received support from a widely expected rate cut but given the recent rally are vulnerable to a hawkish tone or a very close vote. The last decision was split three ways. The US dollar and yields are little changed as those markets also wait for the Fed outcome (see MNI Fed Preview).

• Silver is up 0.5% to $60.95/oz after reaching another new record high of $61.480, above resistance at $60.852. The tightness of the market, risk silver will face US tariffs, and its current momentum has attracted speculators driving its outperformance.
• Gold is slightly lower at $4205.4/oz off the intraday peak at $4218.85 and now close to the day’s low. It has been in a narrow range this month as it waits for direction from the outlook for the Fed in 2026.
• Given gold & silver are non-yield bearing, they are also finding support from expectations that the new Fed chair will be more dovish than Powell. National Economic Council Director Hassett, a front runner to take the position, said that he sees “plenty of room” to cut rates but would remain independent if he became the next FOMC head.
• Not only is the FOMC decision announced later on Wednesday but Q3 US employment costs and November budget data also print. The BoC also decides rates. ECB President Lagarde gives an interview on the future of the euro and dollar. The ECB’s Donnery and Machado also appear.  

• Another day of gains for China bond futures sees the 2-Yr above a key tech level for the first time since early November.  
• The 2-Yr bond future is up +0.03 at 102.45, breaking above the 100-day EMA of 102.420.
• The 10-Yr is up for a fourth consecutive day by +0.07 today, to reach 108.04 as it trades through the combined 20-day / 50-day EMA of 108.02.  Above is the 100-day EMA of 108.10.
• Cash is steady today with the CGB10-Yr at 1.83% and the 2-Yr at 1.39%