NZGBs Cheaper To Start RBNZ Week

NZGB yields start the week higher after U.S. Tsys cheapened on Friday.

• The major cash NZGB benchmarks sit ~3bp cheaper across the curve, with a similar move seen in corresponding swap rates, resulting in little movement in the major swap spreads early on.
• Weekend headlines saw plenty of focus on the COVID situation in China, with news that Beijing’s most populous district has urged its population to stay at home after similar guidance over the weekend and confirmation of China’s first COVID-related death in ~6 months, as well as worry re: case counts in some of the other major cities. Still, the market seems willing to look through these headlines at present.
• Monthly credit card spending data headlines the domestic docket on Monday, with the monthly LPR fixing from China’s PBoC providing some interest further afield.
• Still, Wednesday’s RBNZ decision will dominate matters this week, with consensus looking for a 75bp hike in the OCR before the Bank’s 3-month hiatus.
• Just over 65bp of tightening is priced into RBNZ dated OIS covering this week’s meeting, with a terminal rate of just over 5.10% priced. Both measures are incrementally higher vs. late Friday levels, aided by spill over Friday’s modest upward repricing re: tightening at the Dec FOMC as one regional Fed President suggested that a 75bp hike in Dec was still on the table (the weekend saw another regional Fed President point to a need to slow the pace of tightening next month).