Early NZGB Cheapening More Than Reversed As Supply Goes Well

NZGBs finished 4.5-6.5bp richer across the curve, with swap spreads running mixed as longer dated swap spreads tightened and shorter dated swap spreads ran flat to a touch wider.

• The early cheapening in the space more than reversed as the pressure from the pricing of the green NZGB May-34 syndication ebbed, with the amount issued at the top end of the pre-prescribed range, while pricing was at the tighter end of the initial guidance. Most of the paper went offshore (56%), with a relatively even split allotted to Australia, Europe & North America (16-17% apiece).
• Solid demand at the auction and the removal of supply-related pressure seemed to underpin the space through the remainder of the day, even as core global FI moved off firmest levels of the session.
• Long end receiver side flow in swaps would have aided the bid further.
• Local news flow saw REINZ house price data pull lower as the housing market continues to adjust to the rapidly increasing interest rate environment.
• Elsewhere, there wasn’t much to flag in the way of movement surrounding household inflation expectations data released by the RBNZ.
• RBNZ dated OIS pricing of the terminal OCR remained little changed on the day, hovering a little shy of 5.10%, with a steady ~65bp of tightening priced for next week’s RBNZ gathering.
• Non-resident bond holdings data headlines the domestic docket on Wednesday.