NZGB Post Data Weakness Extends

NZGBS continued to cheapen in the wake of the release of the domestic labour market report, with the major benchmarks ultimately going out 12-14bp cheaper as the curve bear steepened.

• Swap rates lagged the move in yields resulting in some tightening of swap spreads.
• A reminder that the domestic data saw firmer than expected employment growth and average hour earnings, although the unemployment rate held steady as participation jumped.
• Elsewhere, RBNZ Deputy Governor Hawkesby flagged that the data was in line with the Bank’s own expectations, while highlighting the need to slow demand against the backdrop of a “very hot” labour market.
• RBNZ dated OIS firmed at the margins post data, with ~71bp of tightening now priced for this month’s meeting, while a terminal OCR of ~5.25% is now priced.
• Looking ahead, Thursday’s domestic docket will be headlined by the latest round of NZGB supply (’28, ’33 & ’51 paper will be auctioned).