NZGBS: Bear Flattening Extends, RBNZ Pricing Continues To Adjust Higher

Thursday’s weakness in U.S. Tsys has allowed NZGBs to extend on their own Thursday cheapening, with the major benchmarks running 4-7bp lower as the pull away from YtD yield lows extends and the curve flattens again. Swap rates have moved in the same direction, albeit in a more measured manner, showing ~3bp higher across the curve, resulting in swap spread tightening. The 2-/10-Year swap spread has generally consolidated in February, after the pull away from cycle extremes (deepest inversion since the GFC) in late ’22.

• RBNZ dated OIS firms again this morning, leaving just over 60bp of tightening priced for this month’s meeting, alongside pricing of a terminal OCR of ~5.40%.
• The BusinessNZ manufacturing PMI moved back into expansionary territory, printing above the breakeven 50.0 level for the first time since September.
• Elsewhere, domestic card spending data ticked higher in M/M terms, with total card spending breaking a run of two consecutive months of declines lodged at the end of ’22.
• We don’t have anything in the way of meaningful domestic risk events slated ahead of the weekend, which will leave cross-market gyrations, as well as any spill over from the RBA’s SoMP and Chinese inflation data front and centre during the remainder of Friday trade.