By way of BNZ:
- In an essential improvement for the native market, we imagine that New Zealand authorities bonds have certified for the FTSE-Russell World Authorities Bond Index (WGBI), the first authorities bond benchmark utilized by world buyers.
- We might want to wait till late March for formal affirmation that New Zealand authorities bonds will be a part of the index though we might obtain provisional affirmation someday this week. If we’re proper that New Zealand authorities bonds have certified, then they need to formally be a part of the index later this yr, in all probability at first of November.
- Trade estimates recommend round US$2.5 trillion in belongings below administration monitor the WGBI … even with a small index weight (we estimate round 0.2%), New Zealand authorities bonds’ inclusion within the WGBI is prone to generate substantial offshore inflows.
- This could profit each the bond market (implying decrease yields than in any other case) and the NZD.
BNZ’s caveat on the profit:
- In fact, its prone to be very a lot a second-order issue in comparison with different drivers such because the OCR outlook, broader financial developments and tendencies in key world markets.
NZD/USD caught a tailwind off its lows earlier from the information on the proposed Biden-Putin summit.