NZGBS: Closes At Bests With Stronger U.S. Tsys & ACGBs

NZGBs strengthen over the session to close at bests in sympathy with a richening in U.S. Tsy futures and ACGBs (post-RBA Minutes) in Asia-Pac trade. By the close, the 2- and 10-year benchmarks were respectively 9bp and 10bp richer with the strengthening garnering support from a narrowing in the trade deficit in February (-NZ$714mn versus a negatively revised -NZ2.113bn in January). The fact that the annual deficit remained close to record levels is however noteworthy given last week’s worse-than-expected current account deficit and S&P’s bond rating guidance.

• 2s10s swaps curve bull steepened 4bp with rates 2-6bp lower, implying wider swap spreads particularly at the long end.
• RBNZ dated OIS softened 2-8bp for meetings beyond April with terminal OCR pricing dropping to 5.17%. April meeting pricing closed with 21bp of tightening.
• The local calendar is light for the remainder of the week with RBNZ Chief Economist Conway’s speech, “The path back to low inflation in NZ”, at the KangaNews DCM forum on Thursday the highlight.
• Abroad, the calendar is also relatively light today, with Philly Fed and U.S. Existing Home Sales the highlights, ahead of the FOMC decision on Wednesday.