Back From RBNZ-Inspired Peaks

Cross-market impetus has been the name of the game in Sydney dealing. A bid came back in after the space initially showed lower on the RBNZ’s 50bp OCR hike (vs. sell-side consensus of 25bp & pre-decision market pricing of ~42bp of tightening). The RBNZ language re: comfort with its Feb OCR track (a potential hat tip to the idea that the OCR track priced into the OIS strip may be getting ahead of itself) and the Bank highlighting that a larger move now provided future optionality against high levels of global uncertainty (alongside a focus on combatting rising long-term inflation expectations), as opposed to scope for more than previously envisaged tightening, allowed a bid to come back into the space.

• Outside of that, gyrations in U.S. Tsys seemed to dictate price action.
• YM breached its overnight session peak on the aforementioned trans-Tasman spill over as NZGB yields & NZ swap rates fell. The front-end led nature of the move extended the early bull steepening, before the richening and steepening pared back from extremes. YM +7.5 and XM +5.0 at typing. The 5- to 7-Year zone outperformed in cash trade, with 20+-Year ACGBs only ~1bp firmer on the day.
• The latest Westpac consumer confidence reading slid to levels not observed since late ’20, building on the heavy slide seen in Feb, with the survey noting that “at that time concerns around interest rates and inflation were starting to weigh on confidence. These were compounded by Russia’s invasion of Ukraine, an associated spike in petrol prices, and severe weather events.” A look deeper into the details revealed a split between the outlook of those who are more/less indebted, with Westpac flagging that “confidence amongst respondents with a mortgage fell by 9.2% in April amid concerns that the Reserve Bank will be raising the cash rate earlier than previously expected and at a faster pace. Notably, the prospect of interest rate rises may have buoyed sentiment across some sub-groups that stand to benefit. Confidence posted significant gains amongst those aged over 65 (+7%) and amongst freehold homeowners (+5.5%). These are segments without large mortgage debts that are also more likely to depend on interest incomes.”