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Aggressive Richening In NZGBs On Catch Up To U.S. CPI

BONDS

NZGB yields pull aggressively lower in lieu of Thursday’s U.S. CPI release, which saw downside surprises across the board. The major cash NZGBs sit 21-23bp richer across the curve, with the front end leading, resulting in some light bull steepening. Swap rates have generally tracked the moves in NZGBs, with a very modest widening bias in front end swap spreads against a very modest tightening bias further out the curve.

  • Terminal OCR pricing in RBNZ dated OIS has eased by ~20bp in the wake of the U.S. CPI release, last printing just above 5.05%, while ~60bp of tightening is now priced for this month’s RBNZ gathering, against the 68-69bp priced late yesterday.
  • Local data has seen an uptick in the M/M rise in food prices (+0.8% M/M in Oct vs. +0.4% in Sep), while the BusinessNZ manufacturing PMI moved into contractionary territory for the first time in over a year. The collators of the PMI noted that “new orders are falling while the PMI stocks index remains expansionary and firmly above its long-term norms. A low orders-to-inventory ratio typically bodes ill for production ahead.”
  • Local news flow has seen the Government announce that Kainga Ora’s future financing requirements will be met by loans from New Zealand Debt Management (NZDM), rather than private markets.
  • Wider cross-market swings and post-U.S. CPI adjustment will be at the fore into the weekend.
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NZGB yields pull aggressively lower in lieu of Thursday’s U.S. CPI release, which saw downside surprises across the board. The major cash NZGBs sit 21-23bp richer across the curve, with the front end leading, resulting in some light bull steepening. Swap rates have generally tracked the moves in NZGBs, with a very modest widening bias in front end swap spreads against a very modest tightening bias further out the curve.

  • Terminal OCR pricing in RBNZ dated OIS has eased by ~20bp in the wake of the U.S. CPI release, last printing just above 5.05%, while ~60bp of tightening is now priced for this month’s RBNZ gathering, against the 68-69bp priced late yesterday.
  • Local data has seen an uptick in the M/M rise in food prices (+0.8% M/M in Oct vs. +0.4% in Sep), while the BusinessNZ manufacturing PMI moved into contractionary territory for the first time in over a year. The collators of the PMI noted that “new orders are falling while the PMI stocks index remains expansionary and firmly above its long-term norms. A low orders-to-inventory ratio typically bodes ill for production ahead.”
  • Local news flow has seen the Government announce that Kainga Ora’s future financing requirements will be met by loans from New Zealand Debt Management (NZDM), rather than private markets.
  • Wider cross-market swings and post-U.S. CPI adjustment will be at the fore into the weekend.