NZGBS: Firmer With Swap Spreads Tightening

NZGBS open 3-4bp richer, firming on the lead from U.S. Tsys, which rallied on the back of softer than expected labour market readings and as the U.S. banking sector came under pressure in the equity sphere.

• Moves in swaps are more pronounced, with the benchmark rates on that curve shifting 7-10bp lower as the curve flattens and swap spreads tighten.
• Terminal rate pricing continues to hold above 5.60% on the RBNZ-dated OIS strip, which some have suggested represents spill over from pricing surrounding broader global central banks, as opposed to an outright view on the RBNZ (for reference, the RBNZ’s own OCR track has a peak of 5.50%).
• Q4 manufacturing activity data headlines the domestic docket today, with a swifter rate of expansion in the BusinessNZ Manufacturing PMI already in the rear-view.
• Participants will likely have one eye on the latest NFP print out of the U.S., which will cross after hours.