NZGBS: Curve Bear Flattens, Uncovered Auction & Trans-Tasman Dynamic Weighs

The NZGB curve bear flattened, with the major benchmarks running 3-8bp cheaper at the close.

• NZGBs were already on the defensive ahead of today’s auctions, with global core FI markets coming under modest cheapening pressure, allowing the space to unwind the early, modest richening which had represented catch up to NY Tsy trade.
• That was before an uncovered NZGB-27 auction applied further pressure to the front end of the curve, while solid enough demand in the NZGB-34 auction (1.64x cover) and strong demand at the NZGB-51 auction (2.96x cover) promoted curve flattening.
• Swap rates were ~8bp higher across the curve, leaving swap spreads flat to wider.
• That came alongside RBNZ-dated OIS showing ~60bp of tightening for this month’s meeting, while terminal OCR pricing ticked back above 5.30%, aided by another uptick in RBA-dated OIS. That seemingly aided payside swap flows (with higher for longer central bank worry probably contributing to the weakness in the aforementioned NZGB-27 auction).
• Local headline flow was fairly limited.
• Corporate issuance saw NZ$500mn of Feb-28 paper from ANZ priced.
• The latest manufacturing PMI print and card spending data headline the domestic docket on Friday.