NZGBS: Early Fed-Inspired Bid Extends On Firm Demand At Auctions

Benchmark NZGB yields were 11bp lower across the curve on Thursday, with the space going out at richest levels of the day, as a parallel shift was observed.

• Feed through from the latest FOMC decision kickstarted the richening, with NZGBs then extending on their early FOMC-inspired bid in lieu of the latest round of NZGB supply, which came in the form of NZGB-28, -33 & -37. The auctions saw strong to very strong demand, with all 3 well covered, providing cover ratios of 2.5-4.6x, as the longest bond on offer generated the firmest cover.
• Swap rates were 9-14bp lower across the curve, with steepening apparent, leaving swap spreads mixed.
• RBNZ dated OIS continues to show just over 50bp of tightening for next month’s meeting, with terminal OCR pricing in a touch to 5.25%, adding to yesterday’s labour market-inspired downtick.
• Locally, building permits data provided a soft outcome, although markets looked through that release.
• Domestic headline flow has been fairly limited elsewhere.
• Looking ahead, Friday’s local docket is headlined by the latest ANZ consumer confidence survey reading.