NZGBS: Firmer In Lieu Of Labour Market Data

NZGB yields are 7bp lower across the major benchmarks after a flat start, with the Q4 labour market data generating a bid for the space. Meanwhile, swap rates have seen a parallel 8bp shift, leaving swap spreads a touch tighter at the margin.

• To recap, there was an unexpected 0.1ppt uptick in the unemployment rate as employment growth provided a marginal downside miss, the participation rate held steady, private wages printed largely in line with expectations and average hourly earnings slowed.
• This is the last round of meaningful data before next month’s RBNZ meeting. The downside surprise in the Q4 CPI reading (at least relative to Bank expectations) saw RBNZ dated OIS pricing come in, while today’s data has pushed pricing more towards a 50bp hike as opposed to another 75bp step. There is ~59p of tightening now priced for next month’s meeting, a couple of bp lower on the day. Terminal OCR pricing has also come in a touch, but operates in familiar territory, showing between 5.30% & 5.35%.
• China’s Caixin manufacturing PMI print provides the highlight of the broader Asia-Pac docket today, while post-labour market data adjustments and cross-market derived moves will likely dominate when it comes to NZGB trade.