NZGB Curve Flattens, Swap Spreads Widen

The NZGB curve moved from bull flattening, to bear flattening to twist flattening on Thursday, largely taking its cues from gyrations in Tsy markets, leaving yields 5bp cheaper to 2bp richer come the bell.

• Swap rates were higher across the curve, with swap spreads running wider as a result. A reminder that some have suggested that the swap spread widening observed over the last couple of session could be a result of the impending round of WGBI inclusion for NZGBs.
• Local data, in the form of a wider than prior trade deficit in the month of August and an uptick in the Westpac consumer confidence reading, which still remains well below the breakeven 100.0 mark, had no tangible impact on the space.
• RBNZ terminal rate pricing has crept up towards 4.60% vs. 4.50% seen Wednesday, likely on spill over from a similar post-FOMC move in OIS pricing surrounding the Fed.
• Comments from RBNZ Deputy Governor Hawkesby failed to touch on monetary policy, as expected, given the topic of the address.
• Friday’s domestic data docket is empty. Further out, the monthly ANZ business and consumer confidence readings provide the major points of interest on next week’s NZ docket.