NZGBS: Flat Start, Offshore Matters Eyed Post QSBO

NZGBs are flat on the day, with Monday’s closure of cash Tsys limiting broader steer as the new trading day gets underway. For what it’s worth, Tsy futures were marginally softer during Monday’s curtailed trading session, while German FI saw some modest twist steepening and the Gilt curve bear flattened.

• Swap rates are also essentially unchanged across the curve, while the major near-dated OIS pricing points are little changed.
• The latest NZIER QSBO highlighted the impact of inflation and swift RBNZ tightening, as well as some longer standing issues, with the collator noting “a net 73% of businesses expect general economic conditions to deteriorate over the coming months - the weakest over the survey’s history.”
• “The survey results show firms have become much more cautious and are now looking to reduce staff numbers and pare back on investment plans… A growing proportion of firms are also starting to report sales as the primary constraint for their business, suggesting weakening demand is beginning to impact more businesses.”
• On the inflation front NZIER noted that “the pick-up in costs and prices points to high inflation persisting into 2023.”
• Chinese GDP data presents the highlight of the Asia-Pac docket, with markets generally looking through any soft Chinese data releases in recent times given the reopening drive in the country. This seemingly presents some asymmetric risks when it comes to market reaction to potential outcomes. Spill over from pre-BoJ setup in JGBs will also be eyed.