NZGBS: Closed With A Bear-Flattening Ahead Of US Thanksgiving

NZGBs closed 2-9bps cheaper, with the 2/10 curve at the session’s flattest level. Today’s move is consistent with developments in other $-Bloc markets ahead of the US Thanksgiving holiday.

• The US finished yesterday’s session with a bear flattening following stronger-than-expected initial jobless claims and higher-than-expected U of M inflationary expectations.
• The ACGB curve has bear-flattened today following a relatively hawkish speech from RBA Governor Bullock after-market yesterday. The Governor noted that “the remaining inflation challenge we are dealing with is increasingly homegrown and demand-driven…a more substantial monetary policy tightening is the right response to inflation that results from aggregate demand exceeding the economy’s potential to meet that demand”.
• The NZ 10-year underperformed its US counterpart by 3bps, but the NZ-AU 10-year yield differential closed 2bp tighter.
• Swap rates closed 3-8bps higher, with the 2s10s curve flatter and implied swap spreads little changed.
• RBNZ dated OIS pricing closed 2-7bps firmer for meetings beyond Feb’24. Terminal OCR expectations closed unchanged at 5.54%.
• Tomorrow, the local calendar sees Q3 Retail Sales Ex-Inflation.
• Bloomberg reported that negotiations to form NZ’s next government have concluded, with details to be announced tomorrow, Prime Minister-elect Christopher Luxon said. (See link)