Closed At Cheaps Ahead Of Employment Data Tomorrow

NZGBs closed at session cheaps with benchmark yields 9-11bp higher. Us tsys edging away from Asia-Pac bests aided the move late in the local session.

• Swap rates are 3-5bp with implied swap spread significantly wider.
• RBNZ dated OIS closed 4-6bp firmer for meetings beyond July with Feb’24 leading. The May meeting has 23bp of tightening priced with terminal OCR expectations at 5.55% (July).
• In a report titled, ‘Financial Strain on Households and Businesses’, the RBNZ noted that debt servicing costs are expected to more than double the share of disposable income required to service the interest component of mortgage debt for households with a mortgage, from 9% to 22% by the end of 2023.
• The local calendar is scheduled to release tomorrow the Q1 Labour Market Report with BBG consensus expecting some cooling in tight labour market conditions with the unemployment rate increasing to 3.5% from 3.4%. Q1 wage growth is expected to remain at Q4’s strong pace of +1.1% Q/Q.
• The RBNZ Financial Stability Report is also slated for release tomorrow.
• Given that the local market has closed ahead of the RBA rates decision, tomorrow's opening is expected to reflect not only the Australian market's response to the announcement but also any fluctuations in the US Tsys overnight.