NZGBS: 10-Year NZGB Off Bests As U.S. Tsys Twist Steepen In Asia-Pac

NZGBs closed 4-11bp stronger on the day but well off bests as U.S. Tsys twist steepen in Asia-Pac trade. 2/10 cash curve bull steepened 6bp with the 10-year benchmark closing 5bp off best levels. The 2-year benchmark closed at yield lows. NZGBS underperformed U.S Tsys with the 10-year yield differential closing +8bp. NZ/AU 10-year yield differential closed unchanged suggesting ACGB weakness contributed to NZGBs underperformance versus U.S. Tsys today.

• Swaps richen 3-10bp, implying wider swap spreads, with the 2s10s curve 7bp steeper.
• In a speech today RBNZ Chief Economist Conway sounded the usual hawkish rhetoric but acknowledged that the OCR was near the peak and comfortably above neutral with the full contractionary effects yet to be felt.
• Little response from RBNZ dated OIS however which softened 2-7bp for meetings beyond April with terminal OCR expectations at 5.19%. April meeting pricing closed with 23bp of tightening.
• The Antipodean calendar is light until next week. The next major release in NZ is not until ANZ Business Confidence and Building consents on Thursday.
• Accordingly, the market will continue to track U.S. Tsys in the wake of yesterday's FOMC decision. U.S. calendar is light with U.S. Home Sales and Claims data the highlights.