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New Zealand's 10-year government bond yield has declined to approximately 4.47% as the bond market experienced a rally following the government's mid-year budget announcement. This budget revealed a slight decrease in short-term bond issuance. According to the Treasury, the government plans to issue NZ$3 billion fewer bonds in the fiscal year ending June and will reduce issuance by an additional NZ$2 billion the following year. However, the total issuance over the four-year period ending in 2029 is projected to reach NZ$135 billion, which is NZ$3 billion more than what was projected in May. Contributing to this scenario, market expectations for rate hikes next year have been tempered after Governor Anna Breman indicated that the official cash rate is likely to stay unchanged for some time, with a small possibility of a short-term cut. She also remarked that financial conditions have tightened more than anticipated. Swaps now suggest that rates will remain steady until late next year, with a rate hike anticipated in October, moving from the initially expected September.
