DM Rates: Flattening the JGB & NZGB curves
Eyeing Warsh's hearings or US CPI to break the DXY out of its three-week range between 100.5 and 102.
Group Research - Econs, Samuel Tse13 Jul 2026
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Within the G10, the BOJ and RBNZ are the two laggards that are likely to maintain a hawkish stance beyond their counterparts. This could significant impact from an RV perspective across rates and FX. The RBNZ hiked for the first time in this cycle last week to 2.50%. The economy had been facing considerable headwinds and there was a need to drive policy setting below neutral. Expectations are now building that the further normalization is needed, especially with the cash rate neutral widely expected to be closer to 3%. if so, the hike path for the RBNZ is clearer than the other G10 central banks who have maintained a more hawkish stance. Some curve flattening for the NZD curve is likely. 



Ditto for Japan. The BOJ has maintained a slow pace of tightening. However, between persistent yen weakness and an outsized 7% YoY spike in PPI, Finance Minister Katayama has become more assertive in her comments. In particular, there are indications that the GPIF may tweak the portfolio allocation more heavily towards domestic assets. This implies greater repatriation flows and at the least, new monies are more likely to be deployed into domestic assets. Accordingly, JPY assets may be outperform. From a JGB / rates perspective, investors may finally draw some comfort that long-end JGB yields are very attractive in absolute terms. Between further BOJ hikes and demand for long-end JGBs, curve flattening is likely. 

Eugene Leow

Senior Rates Strategist - G3 & Asia
eugeneleow@dbs.com



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