NZGB Flattening Extends

NZGBs have bear flattened to start the session, with the impetus from Monday’s wider core global FI trade in the driving seat, and perhaps an element of setup for tomorrow’s RBNZ decision also in the works. The major cash NZGBs run 3-6bp cheaper across the curve, with swap spreads narrower at the front end and flat further out the curve.

• The 2-/10-Year swap spread has moved further into inverted territory, printing at the most extreme level of inversion witnessed since ’08.
• RBNZ dated OIS has nudged higher, with just under 70bp of tightening priced for tomorrow’s meeting, while terminal OCR pricing sits just above 5.15%.
• Domestic trade balance data has been and gone, with the monthly trade deficit hovering a little off the record wides registered earlier this year.
• There isn’t much in the way of tier 1 risk events slated during the remainder of the NZ session, with trans-Tasman focus falling on RBA Governor Lowe’s dinner time address.