NZGBS: Early, Modest Cheapening Reverses

NZGBs faded the early cheapening/steepening, with (delayed) impact from soft domestic data and yield appeal (outright and cross-market) perhaps at play, leaving the major NZGB benchmarks 2-3bp richer across the curve at the bell, with bull steepening in play.

• Receiver-side flows in swaps would have also aided the richening, with swap spreads little changed to a touch tighter across the curve (bull steepening was also observed on the swaps curve).
• The major RBNZ dated OIS pricing in the front end of the strip is little changed, with ~70bp of tightening priced for the Feb ’23 meeting, alongside a terminal OCR of ~5.55%.
• Local data flow saw a lower rate of expansion in the services PMI reading alongside a record low Q4 consumer confidence reading in the latest Westpac survey.
• The NZGB space was more resilient to speculation surrounding the BoJ vs. global counterparts, with some AU/NZ cross-market trades perhaps lending support as ACGBs struggled and NZGBs outperformed.
• Looking ahead, Tuesday’s local docket is headlined by the monthly round of ANZ business and consumer confidence readings.