NZGBS: Cheaper, Global Cues Remain Front & Centre

NZGBS ground cheaper on Friday, unwinding some of Thursday’s notable rally. That left the major NZGB benchmarks running 6-7bp cheaper at the bell, with some modest weakness in U.S. Tsys during Asia-Pac hours adding to the impetus derived from wider core global FI trade on Thursday.

• Benchmark swap rates moved in the same direction as bonds, finishing 7-9bp higher across the curve, with swap spreads widening a touch, suggesting payside swap flow may have also factored into the move in NZGBs.
• Major near-term RBNZ dated OIS pricing measures were flat to a touch firmer, showing 64bp of tightening for next month’s meeting and a terminal OCR of just over 5.40%.
• Local data saw the latest BNZ manufacturing PMI survey print in contractionary territory for a third straight month. The survey collator noted that “the negative mindset of manufacturers has picked up pace, with the proportion of negative comments at 63.5%."
• A deeper dive into the political situation in New Zealand after PM Ardern’s resignation, and ahead of Sunday’s Labour Party leadership vote, can be found here.
• Further out, Q4 CPI data headlines next week’s local docket, with domestic inflationary pressure and stagflation worry well-documented.