NZGBS: Back To Flat Come The Close, Particularly Tight Ranges Noted

NZGBs stuck to particularly narrow ranges on Wednesday, initially shifting cheaper at the margins in sympathy with Tuesday’s weakness in U.S. Tsys and Bunds, before closing at essentially neutral levels after Tsys moved away from session lows. This came as Asia-Pac participants looked to some of the more FI-supportive factors that were apparent during Tuesday’s wider session.

• The moves in NZGBs were much more muted than that seen in wider core global FI markets, including ACGBs and JGBs.
• Major swap rates were ~1.5bp lower across the curve, which meant that swap spreads were a touch tighter on the day, providing another supportive factor after swap rates tracked the early, modest cheapening in bonds.
• The major near-term RBNZ dated OIS measures were flat come the end of the local session, with 66bp of tightening priced for the Feb ’23 meeting, alongside a terminal OCR of ~5.50%.
• Lower tier local data saw an eighth straight M/M gain for filled jobs, while the ANZ commodity price index experienced an incremental dip in M/M terms.
• Looking ahead, building permits data headlines the domestic docket during the remainder of the week.