NZGBS: Firmer On The day On Global Cues, Belly Leads The Bid

The wider global core FI dynamics supported NZGBs, allowing them to build on their early richening (which was linked to post-BoJ moves and soft U.S. data).

• That left the major cash NZGB benchmarks 13-18bp richer at the close, with the belly of the curve outperforming and the wings lagging.
• Swap rates were 11-16bp lower as that curve flattened, leaving swap spreads wider in the main.
• RBNZ dated OIS came in at the margins on the global forces, showing just over 60bp of tightening for next month’s meeting, alongside a terminal OCR of 5.40%.
• New Zealand Prime Minister Ardern announced that she will be stepping down as leader of the Labour Party by 7 February, tendering her resignation as Prime Minister. Labour will vote on party leadership on 22 January. She also noted that the next election will be held on 14 October.
• The latest M/M food price print revealed a 1.1% move higher in December, with domestic inflationary pressures already well documented.
• Today’s NZGB supply went smoothly to well, with cover ratios of 1.7-3.5x observed.
• Non-resident NZGB holdings moved to the highest proportion observed since ’17 in December.
• Friday’s domestic docket is headlined by the latest manufacturing PMI print.