NZGB Curve Twist Steepens, Off Cheaps On Data & Receiver-Side Swap Flows

Cash NZGBs twist steepened on Wednesday, with the major benchmarks running 0.5bp richer to 3bp cheaper, pivoting around 5s. Receiver-side swap flow in lieu of weak domestic business confidence data, as well as softer than expected Australian CPI data and Chinese PMI readings, seemingly aided a move away from session cheaps, with swap spreads tightening across the curve as swap rates finished little changed to 5bp lower on the day (with the swap curve steepening).

• RBNZ dated OIS continue to price just under 70bp of tightening for the first RBNZ meeting of ’23, while terminal OCR pricing continues to hover around 5.40%.
• The RBNZ “launched a second consultation as part of the five-yearly review of the Monetary Policy Committee’s (MPC) Remit that guides monetary policy decisions.” The Bank noted that “this second consultation seeks feedback on the recommendations we are intending to provide to the Government about possible changes to the Remit.” When it comes to the return of inflation to target, the RBNZ has noted that “the Reserve Bank considers the Remit best supports wellbeing by leaving the time horizon undefined.”
• Looking ahead, tomorrow’s local docket includes CoreLogic house price data and the weekly round of NZGB auctions (covering NZGB-27, -33 & -51).