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NZGBS: All Eyes On Fallout From SVB Collapse

BONDS

NZGBs open 8-9bp richer after U.S. Tsys rally in trading ahead of the weekend. While the components of the payrolls report contributed to the strength, the evolving Silicon Valley Bank (SVB) situation and the global risk-off tone appear likely to have been the primary driver. Over the weekend, U.S. Treasury Secretary Yellen met with banking regulators as U.S. authorities were preparing “material action” to shore up deposits in SVB and to try and stem any broader financial fallout. The Fed is also considering easing access terms to its discount window to turn assets that have lost value into cash.

  • Swaps open stronger with rates 8bp lower, implying wider short-end swap spreads.
  • RBNZ dated OIS pricing is 5-7bp softer for across meetings. Terminal OCR expectations pull back to 5.52%, just above RBNZ’s projected OCR peak of 5.50%.
  • The local docket is heavy this week with Q4 GDP as the focus. So far today, BusinessNZ PSI has printed stronger at 55.8 for February.
  • February REINZ house prices and Net Migration are scheduled for tomorrow, ahead of Q4 Current Account (Wed) and Q4 GDP (Thu) with BBG consensus currently -0.2 Q/Q and 3.3% Y/Y.
  • Nonetheless, all eyes will remain focused on U.S. Tsys and headlines related to the SVB collapse.
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