NZGBS: Flatter Curve, Steeper Swaps, HYEFU In View

The early cheapening across the NZGB curve saw an extension, with some weight in the Aussie bond space and perhaps some fiscal/issuance-related caution ahead of the HYEFU applying pressure. Participants also had to adjust to Monday’s cheapening in U.S. Tsys, with one eye on the impending U.S. CPI print, which nullified any potential spill over from a modest bid in the Tsy space during Asia-Pac hours.

• That left the major benchmarks running 2.5-5.5bp cheaper at the close, as the curve bear flattened.
• Meanwhile, swap rates were 4-7bp higher as that curve steepened, resulting in mixed swap spread performance on the session, with tightening seen in the very front end and some widening further out.
• RBNZ dated OIS was little changed, pricing ~68bp of tightening for the Feb ’23 meeting and a terminal OCR of ~5.45%.
• Local data saw a flat print for food prices (M/M) and another M/M fall in the REINZ house price index as the property market adjusts to ever-tighter monetary policy.
• The HYEFU, current account data and a parliamentary address from RBNZ Governor Orr (opening remarks at the Finance and Expenditure Committee (FEC) annual review) are due Wednesday.