NZGBs Flatter To Start The Week, China COVID Matters Headline

The COVID situation in China, including the pockets of unrest related to COVID restrictions witnessed over the weekend, provided a bid for NZGBs on Monday, leaving the major cash NGZB benchmarks 7-10bp richer come the bell, with some bull flattening in play.

• Swap rates generally tracked the move across the curve, resulting in little net movement in swap spreads on the session.
• RBNZ dated OIS eased a touch on the session, owing to the above dynamics. That leaves RBNZ dated OIS pricing just under 70bp of tightening for the Feb ’23 meeting, with a terminal OCR of just over 5.40% priced.
• RBNZ Assistant Governor Silk gave a couple of interviews, as she reiterated the Bank’s surprise at persistently strong inflation, while highlighting the lagged impact of monetary policy, alongside the benefits that a stronger NZD would bring in the current inflationary backdrop. The remainder of her comments largely went over the Bank’s latest round of economic projections.
• The local economic docket is empty on Tuesday.