NZGBS: Early Cheapening Holds, CPI Eyed

There was little to move the needle for the NZ rates space during Monday’s session, leaving participants to adjust to Friday’s moves in wider core global FI markets.

• That presented a cheapening bias in early trade, with those moves essentially maintained across the curve as the major benchmarks finished the session 9.5-11.0bp cheaper, holding a light steepening bias.
• Swap rates displayed a similar steepening bias, although the moves there were more muted, as the major benchmarks finished 4-6bp higher.
• Liquidity was thinned by a regional holiday in Wellington.
• The key short-term RBNZ dated OIS measures are flat to incrementally higher to start the week, showing 65bp of tightening for next month’s gathering, alongside a terminal OCR of just over 5.45%.
• The Labour party’s Chris Hipkins was chosen to replace outgoing PM Ardern. He is due to be sworn in as PM on Wednesday. Hipkins, Police and Education Minister, was the only one to stand for the position. He has already pointed to a focus on the economy given the well-documented challenges, lining up the potential scrapping of some of Ardern’s policies.
• Looking ahead, Q4 CPI data (Wednesday) provides the highlight of the domestic economic calendar this week, with the latest PSI survey, credit card spending data, trade balance and the monthly ANZ business survey set to supplement the headline release throughout the week.