NZGBS: BoJ Sees Space Away From Session Cheaps, Swaps Flat To Lower

NZGBs richened into the close, with the lack of movement in the BoJ’s YCC settings taking the edge off the early session cheapening. The early move was seemingly linked to the weakness in U.S. Tsys observed into the NY close and perhaps an element of some last minute pre-BoJ positioning in the NZGB market.

• That left the major benchmarks running 2-3bp cheaper at the close, with some very modest bear steepening in play.
• Swap rates followed the general gyrations in NZGBs, albeit with slightly longer trading hours, which allowed a flattening bias to develop, as swap rates finished unchanged to 3bp lower across the curve.
• There could be a further adjustment to the post-BoJ decision moves in early Thursday dealing, but that will be contingent on the global reaction to the matter.
• RBNZ dated OIS is showing 62bp of tightening for next month’s meeting after nearly fully pricing in a 75bp step in recent weeks, while the terminal OCR print shows in familiar territory, between 5.40-5.45%.
• On the local data front, card spending data saw a M/M fall in Dec, while the latest REINZ house price reading pulled lower once again as the impact of the RBNZ’s expeditious tightening cycle continues to filter through.
• Looking ahead, supply in the form of NZGB-28, -32 & -41 is due tomorrow, with food prices and non-resident bond holding data also set to cross.