NZGBs A Touch Richer On Chinese Pushback Re: COVID Strategy Tweaks

Early Monday trade has seen ~3bp richening across the major cash NZGBs, with swap rates falling by a similar amount, leading to nothing in the way of meaningful changes when it comes to swap spreads. RBNZ dated OIS is a touch softer, pricing 65bp of tightening for this month’s meeting, with terminal OCR pricing in to ~5.15%.

• The previously alluded to weekend commentary from Chinese health officials re: the COVID situation in the country (steadfast support for the current zero COVID strategy) dominated weekend news flow, and is the main driver for price action early this week.
• However, source reports from the WSJ (among other outlets), noting that “President Biden’s top national-security adviser has engaged in recent months in confidential conversations with top aides to Russian President Vladimir Putin in an effort to reduce the risk of a broader conflict over Ukraine and warn Moscow against using nuclear or other weapons of mass destruction” may be limiting the China-inspired move.
• These headlines are being netted against the input from Friday’s core FI market moves to start the week.
• The fallout from the above headline flow and monthly Chinese trade balance data will dominate during Asia-Pac hours on Monday, with nothing in the way of meaningful domestic risk events slated.
• Note that the RBNZ has confirmed that “the Review and Assessment of the Formulation and Implementation of Monetary Policy (RAFIMP) will be published at 9am on 10 November.”