We’re also only a few weeks out from the NZ election on 7 November, and it definitely feels like plenty of people have put bigger decisions on hold while they wait to see how things land.
Offshore, the US midterm elections are also coming up in November, with every seat in the House and around a third of the Senate being contested. The result will have a big influence on the direction of US fiscal and economic policy over the following couple of years.
So there’s certainly no shortage of uncertainty around at the moment.
One thing getting a lot more airtime lately is the bond market, particularly US Treasury yields.
It sounds pretty dry, and admittedly bonds probably aren’t going to come up around the BBQ this summer, but they actually matter quite a lot when it comes to mortgage rates here in NZ.
What actually is a bond?
In simple terms, when a government needs to borrow money, it issues bonds.
An investor lends the government money for a set period and receives interest in return.
The yield is basically the return investors want for lending that money.
If investors become more worried about inflation, government debt, future interest rates or risk generally, they usually demand a higher return, which pushes bond yields higher.
And lately they’ve moved a lot.
The US 10-year Treasury yield recently reached around 5.36%, its highest level in more than 24 years, before easing back towards 5%.
That’s a meaningful move in one of the world’s most important financial markets.
Why is everyone so focused on the US?
A big part of the story is the amount of money the US Government is borrowing.
US federal debt is now around US$39–40 trillion, equivalent to roughly 125–130% of GDP, while here in NZ net core Crown debt was $186.8 billion, or 40.9% of GDP, at June 2026. They aren’t directly comparable measures, but the contrast gives you a sense of scale.
The issue isn’t that anyone thinks the US is suddenly going to run out of money.
It’s more that investors are asking how comfortably it can continue running large deficits, refinancing existing debt and paying bigger interest bills.
And when investors want a higher return to keep lending, yields go up.
There’s also another force at play: AI.
Huge amounts of capital are being poured into data centres, chips, energy infrastructure and AI-related businesses.
That means governments issuing enormous amounts of debt are competing with some of the world’s biggest companies for investors’ money.
Higher energy prices, stronger US growth, public debt concerns and heavy AI investment have all been cited as factors behind the recent rise in Treasury yields.
And as we saw again recently, sentiment can turn quickly. Concerns around heavily indebted AI businesses sparked a sell-off in technology shares, while money moved back into government bonds and Treasury yields eased.
Markets can change direction pretty fast.
So what does any of this have to do with your mortgage?
Quite a bit.
One of the biggest misconceptions is that New Zealand mortgage rates simply follow the OCR.
They don’t.
The OCR is important, particularly for short-term interest rates, but banks also fund themselves through customer deposits and wholesale financial markets.
For fixed mortgage rates, especially over longer terms, wholesale rates and swap rates matter a lot. Those markets are influenced by what is happening in global bond markets.
Put simply, if investors can earn a higher return from government bonds, banks generally have to pay more to attract funding too.
If the bank’s cost of money goes up, fixed mortgage rates can come under upward pressure.
That’s why you can sometimes see the OCR stay unchanged, or even fall, while fixed mortgage rates barely move, or occasionally move the other way.
It’s also why I think it pays to look beyond just the next OCR announcement.
Right now there are a lot of moving parts: inflation, energy prices, government debt, geopolitical uncertainty, AI investment and elections both here and offshore.
All of those can affect bond markets, funding costs and ultimately the mortgage rates NZ borrowers see.
Which brings me back to something I say quite a lot:
How you structure your mortgage can be just as important as the rate itself
There isn’t one right structure for everybody.
For some people, spreading lending across different fixed terms makes sense. For others, keeping some floating or revolving credit provides useful flexibility.
The important thing is making sure the structure suits your circumstances rather than simply chasing whichever rate happens to be lowest on the day.
Inflation still worth watching
Back here in NZ, inflation remains one of the big things to watch.
BNZ’s economics team is expecting Q3 annual inflation of around 3.9%, broadly in line with the Reserve Bank’s forecast, but their bigger concern is what happens next.
Higher fuel prices, a weaker NZ dollar and rising costs being passed through into areas such as airfares and construction mean BNZ sees increasing upside risk to Q4 inflation.
So although we’ve come a long way from the inflation peaks of a few years ago, we’re certainly not completely out of the woods yet.
Queenstown still humming
I was lucky enough to spend a few days down in Queenstown last week and caught up with Jock Kooger from Bayleys while I was there.
Such an amazing part of the country, and Queenstown was absolutely humming.
Jock was also pretty positive about the property market down there.
It was another good reminder that there really isn’t one single “New Zealand property market”.
Auckland is still feeling relatively soft in quite a few areas, while Queenstown is dealing with a completely different mix of supply, demand, tourism, migration and buyer activity.
It’ll be interesting to see how the different markets perform over the next few months, particularly once the election is behind us.
A quick plug for I Am Hope 💛
And finally, something a bit more important than bond yields.
Colab is really proud to support I Am Hope and Gumboot Friday.
The work they do helping young Kiwis access free counselling is pretty special, and it’s a cause I’m very happy to get behind.
If you’re in a position to make a donation, even a small amount genuinely helps.