The Reserve Bank of New Zealand published an analytical note assessing how far global market shocks, particularly from the United States, help explain movements in the spread between New Zealand Government Bond yields and interest rate swap rates (the NZGB-swap spread), following the increase in spreads since mid-2023. The note documents that NZGB-swap spreads tend to become more volatile during periods of global sovereign bond market illiquidity and moved persistently higher after the Global Financial Crisis, with the post mid-2023 rise correlated with higher sovereign bond-swap spreads across a range of jurisdictions. Using a structural vector autoregression framework, the Reserve Bank estimates that in the longer run around 56% of the variation in the 10-year NZGB-swap spread is explained by US shocks, while historical decomposition indicates both US and domestic shocks have contributed to the increase in the 10-year spread since mid-2023.
Reserve Bank of New Zealand 2026-01-20
Reserve Bank of New Zealand analysis links NZGB-swap spread moves to global illiquidity and finds US shocks drive about 56% of long-run variation
The Reserve Bank of New Zealand's analytical note indicates that global market shocks, particularly from the US, account for about 56% of the variation in the 10-year New Zealand Government Bond-swap spread, with both US and domestic shocks contributing to its increase since mid-2023. The note highlights increased volatility in NZGB-swap spreads during global sovereign bond market illiquidity and a persistent rise post-Global Financial Crisis.