NZGBS: Bearish Bias To Start a Heavy Data Week

Friday’s tick higher in U.S. Tsy yields has applied some pressure to NZGBs in early Monday trade, with the major benchmarks running 2.0-3.5bp cheaper as a result, while there is some modest bear steepening in play.

• Swap rate moves have been a little more pronounced, with the major benchmarks on that curve running 4-5bp higher, once again steepening, resulting in a wider start for swap spreads.
• The major short-dated OIS measures are little changed on the day, with just over 65bp of tightening priced for the Feb ’23 meeting and a terminal OCR of ~5.40% eyed.
• Weekend news flow saw PM Ardern’s ruling Labour Party lose a by-election, and therefore a seat in parliament, pointing to (previously documented) headwinds in next year’s general election.
• Fiscally, there will be increased spending in public transport in Auckland, although the fresh investment (NZ$200mn) should be inconsequential for markets.
• NZ net migration data has been and gone, but that isn’t a market mover. Macro headline flow will take focus from here, with continued regional (and indeed global) eyes on the COVID situation in China. The latest Japanese Tankan survey provides the highlight of the regional economic calendar on Monday, but that shouldn’t move the needle for NZ markets.
• Looking ahead to later this week we have a busy local docket, which includes the HYEFU, Q3 current account and GDP data, the BusinessNZ m’fing PMI, REINZ house price metrics and food price data. Elsewhere, RBNZ Governor Orr will make his latest parliamentary appearance.