Harbour Monthly Commentary: Second time lucky

• It was a relatively stable month in NZ fixed interest, with common themes to last month: the RBNZ on hold; the Fed keeping global long yields low, for now; and relative calm in Europe, for now.
• The main event for our market was the launch of a new NZ government inflation linked bond (‘linker’) maturing in 2025.
• At $2.5bn, it was unofficially the largest new bond issue in NZ history, and received an unprecedented $4.5bn in demand.
• We believe this strong interest was helped by recent global inflation worries following the Fed’s Quantitative Easing program, and attractive pricing of the new deal relative to domestic and foreign comparators.
• We participated in the deal and see this new instrument as a very welcome addition to NZ’s capital market.  It provides an additional tool for NZ fixed interest managers to manage risks and identify opportunities.

Some common themes linger through October

It was a relatively stable month in New Zealand fixed interest, with interest rates remaining largely within recent ranges as common themes remained.   

The new Governor of the RBNZ re-affirmed the idea that they appear in no rush to either hike or cut NZ short term interest rates.   The US Federal Reserve’s Quantitative Easing (QE) program continued to cap global long-term interest rates, for now.  And credit spreads continued to contract, helped by a relatively stable environment in Europe and lack of local corporate bond supply.