NZGBS: A Touch Firmer, Swaps Tighten

Cash NZGBs are 2bp richer across the curve early on, benefitting from an extension of Friday’s bid in U.S. Tsys during Monday’s NY session, which more than countered the spill over from some modest cheapening in core global FI markets during the London morning.

• A bounce in German FI into the cash close helped broader core global FI, while softer short-term consumer inflation and household spending expectations in the latest NY Fed survey provided another limited catalyst.
• Swaps rates are 4-6bp lower across the curve, with swap spreads tightening.
• RBNZ dated OIS pricing is little changed, to a touch softer, looking for 66bp of tightening at the Feb ’23 meeting alongside a terminal OCR of just under 5.50%.
• Today’s data docket is light, for both NZ and the wider Asia-Pac region, which will leave focus on Tokyo CPI, Chinese assets and the return of Tokyo market participants (and therefore JGBs) after the elongated weekend in Japan.
• Fed Chair Powell’s Tuesday address provides the nearest meaningful macro risk event.