Upbeat investor risk sentiment brings solid gains for global equity markets. UK widely anticipated Autumn Budget released. A marginally hawkish tone from the RBNZ pushed NZ rates and the NZ dollar sharply higher

There was limited economic data to provide the market with direction. Initial jobless claims fell slightly despite expectations for a modest increase. Core US durable orders for September beat the consensus estimate but the data is largely stale by this point. Treasury yields increased following the claims data, led by the front end of the curve, though moves were not large. 10-year yields have since retraced and are little changed at 4.01%.

UK Chancellor Rachel Reeves delivered her widely anticipated Autumn Budget. Taxes were increased by £26 billion which will be used to cover higher welfare spending and to bolster fiscal headroom against future shocks. This will take the overall tax burden to 38% of GDP by the end of the parliament which is an all-time high. The Office for Budget Responsibility published its forecasts ahead of the Budget to a ‘technical error’ contributing to market volatility.

The pound gained and gilt yields fell, led by the longer maturities, after the Budget announcement. The bond market was comforted by the wider fiscal headroom, a smaller borrowing projection and a decrease in the supply of long-dated gilts. 30-year yields declined 11bp to 5.17%.

The US dollar is little changed against the euro and modestly weaker against the yen in offshore trading. The NZD consolidated after the hawkish cut by the RBNZ contributed to a sharp appreciation in the local session yesterday. The move higher faded ahead of 0.5700 and NZD/USD has oscillated in a narrow range around 0.5680 overnight. The NZD maintained the solid gains made on key cross rates after the RBNZ yesterday.

Australia released its first full monthly CPI report which in time will become the primary measure of inflation. The RBA will continue to forecast and focus on the quarterly trimmed mean measure in the near-term. In any case, headline CPI increased at 0.3% in October taking the annual rate to 3.8% which was higher than the consensus estimate. The trimmed mean measure was also above expectations. The data contributed to a sharp selloff in Australian rates and supported the AUD.

The RBNZ cut rates by 25bp to 2.25% which was in line with expectations and fully discounted by market pricing. The decision was reached by 5-1 majority. The dissenter preferred to leave rates on hold which was the alternative option discussed by the Committee. The modelled OCR track reaches a 2.20% trough in mid-2026 signalling a marginal easing bias. Future moves in the OCR will be data dependent, but the hurdle for further easing appears high.

The modestly hawkish RBNZ tone contributed to a selloff in NZ fixed income in the local session yesterday. The swap curve moved higher and flatter. 2-year rates increased 11bp to 2.70%, the highest level in two months as pricing for the terminal OCR lifted to 2.21%. 10-year rates closed 6bp higher at 3.81%, flattening the 2y/10y curve to +111bp from the recent +117bp peak. There was similar price action for government bonds with 10-year yields closing 6bp higher at 4.32%.

NZ Debt Management (NZDM) released the monthly tender schedule for December and will offer NZ$900m nominal bonds in the month. There will be two tenders before the seasonal pause in issuance. In the weekly tender today, NZDM will offer NZ$450million of nominal bonds May-30 ($225m) and May-34 ($225m). A small parcel of Sep-2040 inflation-indexed bonds will also be tendered.

The Fed will release the Beige book covering October and early November soon after we go to print this morning. The market will be looking for further evidence to support a December rate cut. The domestic focus will centre on Q3 retail sales data, and the ANZ business confidence survey scheduled today. Confidence measures are the only data of note this evening with market activity likely reduced due to US Thanksgiving.

Stuart Ritson is a senior Markets Strategist at BNZ Markets.