Upcoming NZGB May-2031 tap syndication
At the Budget Economic and Fiscal Update in May, New Zealand Debt Management (NZDM) announced it expected to undertake three tap syndications of existing nominal NZ Government Bonds (NZGB) in 2025/26. In addition, a new September-2050 inflation indexed bond will be established. NZDM has indicated the first transaction will be a tap of the existing May 2031 line, before the end of August.
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Post Budget NZGB supply update
Bond programme revised modestly higher
New Zealand Debt Management (NZDM) updated the bond programme today alongside the Budget Economic and Fiscal Update (BEFU). Forecast gross New Zealand Government Bond (NZGB) issuance has been increased by a total of NZ$4 billion over the forecast period to June 2029, compared with the Half Year Economic and Fiscal Update (HYEFU) in December. Gross issuance has been revised higher, at each borrowing programme update since December 2021, reflecting ongoing fiscal pressures.
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Rates Strategist: Lower rates amid subdued rebound
• Headwinds from the global growth downshift, combined with subdued domestic high frequency activity indicators, skew the risks for front end NZ rates lower. The RBNZ is expected to cut rates by 25bp at the May 28 Monetary Policy Statement, signal room for further easing, and shift its modelled OCR path lower.
• Curve steepening is likely to resume now the April overshoot has corrected.
• The compensation for taking duration risk is improving. 10Y NZGBs offer the highest FX hedged yield within developed markets. Although the backdrop for duration appears favourable, we have a higher conviction for shorter maturities.
• NZ swap spreads are expected to consolidate ahead of the borrowing programme update alongside the Budget on 22 May. A pre-Budget speech by Finance Minister Willis implied continued fiscal pressures amid downward revisions to growth forecasts by the Treasury.
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