NZGBS: Following The Global Lead

Weakness in core global FI markets, inspired by follow through from Wednesday’s price action in U.S. Tsys and firmer than expected inflation data from Europe (as well as continued brisk EGB supply), has applied pressure to NZGBs in early Friday trade, leaving the major benchmarks running 6-7bp cheaper. Swap rates are 4-5bp higher across the curve, resulting in slightly tighter swap spreads.

• ANZ consumer confidence data softened after last month’s uptick, moving back below 80 but operating some way above December’s all-time low.
• Early Friday rhetoric from RBNZ Governor Orr once again stressed that core inflation remains too high, although he pointed to early signs that price pressures are easing. Orr also suggested that a single mandate is not simpler than operating a dual mandate, while attempting to downplay criticism of the timing of the tightening cycle, as he said that starting the tightening process sooner would not have had much impact.
• Terminal OCR pricing holds steady, a couple of bp below the 5.50% peak seen in the Bank’s OCR track, while a steady 40bp of tightening is priced for the Bank’s next meeting.
• Global cues will be in the driving seat ahead of the weekend, given the lack of local risk events slated.