NZGBs Cheaper Ahead Of Weekend, Pre-RBNZ Hedging May Have Weighed

Cash NZGBs were cheaper ahead of the weekend, with the early uptick in yields seeing a modest extension through the day, as the major benchmarks finished the final session of the week 3.5-5.0bp cheaper. The curve came under some light bear flattening pressure.

• This came even as U.S. Tsys richened incrementally during Asia-Pac hours, with payside swap flow in the front end of the NZ curve seemingly aiding the cheapening, as both 2- & 5-Year swap spreads widened, while swap spreads further out the curve were little changed to a touch tighter.
• This payside flow may have been a case of participants putting some pre-RBNZ hedges into place, with RBNZ dated OIS now pricing 65bp of tightening for next week’s meeting, alongside a terminal cash rate of just below 5.10%, with both moving incrementally higher on the day.
• The aforementioned RBNZ decision headlines next week’s domestic docket, with 10 of the 14 surveyed by BBG looking for a super-sized 75bp step from the Bank, after a run of consecutive 50bp moves.
• Elsewhere, the monthly credit card spending, trade balance and ANZ consumer confidence data is slated, with Q3 retail sales volume also due.