NZGBs Cheaper To Start

Cash NZGBs play catch up to the relatively hawkish round of Fedspeak provided on Monday, leaving the major benchmarks 2-5bp cheaper as the curve bear flattens. Swap rates are ~2bp higher across the curve, leaving swap spreads flat to a touch narrower.

• Core FI markets edged back from richest levels of the session on Monday, with the early firming a product of the COVID situation in China, after the restrictions in place there resulted in pockets of social unrest across some of the major cities in the country over the weekend.
• RBNZ dated OIS is little changed this morning, with just under 70bp of tightening priced for the Feb ’23 meeting, while terminal OCR pricing hovers just above 5.40% (vs. RBNZ projections of 5.50%), after the Chinese COVID situation allowed pricing to ease back from hawkish extremes on Monday.
• The local docket is empty today, with little of note slated across the Tasman & in the Asia-Pac region on the whole. That will leave macro headline flow and the COVID situation in China at the fore.