NZGBS: Closed With Curve Sharply Steeper Ahead Of Fed Chair Powell’s Fireside Chat

NZGBs closed flat to 10bps cheaper, with the 2/10 curve steeper. The benchmarks finished 2bps off the session’s worst levels after a quiet session. With the domestic data calendar relatively light, local participants have been content to sit on the sidelines ahead of Fed Chair Powell’s fireside chat later today.

• Swap rates closed 6-11bps higher, with the 2s10s curve steeper and implied swap spreads wider.
• RBNZ dated OIS pricing closed little changed, with terminal OCR expectations at 5.53%.
• The RBNZ can’t afford to ignore a surge in immigration, even though it’s expected to subside next year, because inflation has been above target for so long, Deputy Governor Christian Hawkesby said. “When you’re an environment where inflation is at target and inflation expectations are well anchored, you’ve got the luxury to look through things and bide your time,” however we “don’t have that luxury.” (See Bloomberg link)
• The local calendar sees the release of the Terms of Trade Index on Monday.
• Later today sees the release of the ISM manufacturing index before Fed Chair Powell's fireside chat at 1100ET including text. Chicago PMI strength and other manufacturing surveys point to some upside risk. The FOMC media blackout begins Friday at midnight ET.