NZGBS: Close On Cheaps As U.S Tsys Weaken

Today threatened to be a volatile session as the market caught up with developments in AU and U.S., and it didn't disappoint with the 2-year NZGB benchmark trading in a 10bp range (the 10-year traded in a more modest 4bp range). NZGB benchmarks close at session cheaps with Fed Chair Powell-induced U.S Tsy weakness the key driver. The 2/10 cash curve bear flattened with yields little changed to +7bp higher.

• On a relative basis, the NZGB benchmarks outperformed U.S. Tsys with the 10-year yield differential -4bp tighter and the 2-year yield differential -12bp lower. Not surprisingly after recent RBA developments, the NZ/AU 10-year yield differential closed +4bp wider.
• A similarly heavy session for swaps with rates 4-9bp higher, implying wider swap spreads, and the 2s10s curve 5bp flatter.
• With the strongly divergent messages from the RBA and the Fed since the local close yesterday RBNZ-dated OIS has taken its cue from U.S. developments. Pricing is 3-9bp firmer across meetings with August leading. April pricing firms to 45bp of tightening. Equally noteworthy, terminal rate expectations have pushed well above the RBNZ’s projected OCR peak of 5.50% to ~5.60%.
• The local calendar has card spending data for February scheduled on Thursday, while RBNZ Deputy Governor Hawkesby will appear at a private event, fleshing out the previous monetary policy decision (no new information will be divulged).