Research Briefing | Feb 27, 2024

Fixed Income: Kiwi bonds to fly high

We remain steadfast on our long-standing heavy overweight in New Zealand government bonds within our global DM fixed income allocations.

What you will learn:

  • Upside surprises in activity and inflation this year have opened the market’s mind to the possibility of a hike in H1. But we doubt the criteria set out in the November monetary policy statement for a hike have been met.
  • Our economists think the RBNZ will instead remain on hold in H1 before cutting twice in H2 as inflation falls to target and unemployment rises.
  • Our multi-factor rates scorecard adds to our conviction, sending a near unanimous signal that kiwi bonds will outperform other developed market govies in the near term, based on attractive term premia, cheap valuations and strong mean-reverting properties.
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