NZGBS: Global Bias Applies Modest Cheapening Pressure

The move higher in U.S. Tsy & German Bund yields observed at the backend of last week spilled over into Monday trade, subsequently applying some pressure to NZGBs in early Tuesday dealing, with the benchmarks running 3.0-4.5bp cheaper as the curve bear steepens.

• Swap rates are flat to 2bp higher, back from their early session highs.
• Local data flow has seen a slowing in the rate of expansion in the latest BusinessNZ PSI print, with the collators noting that “December marked a significant slowdown in a short space of time for the PSI, although the loftiness in New Orders/Business suggested there was still a lot of demand- side pressure at play.”
• Political matters continue to dominate headlines, but these are second order (at best) considerations for markets given the domestic and macro backdrops.
• Tomorrow’s Q4 CPI data presents the domestic highlight of the week, with near-term RBNZ dated OIS pricing steady this morning, showing ~65bp of tightening for next month’s meeting, alongside a terminal OCR of just over 5.45%.