NZGBS: Impending RBNZ Decision Front & Centre

A twist flattening move became apparent in NZGBs as the day wore on, with the impulse from Monday’s U.S. Tsy trade and a light bid in global core FI markets during the Asia-Pacific session providing some support as NZGBs recovered from early session cheaps.

• That left the major NZGB benchmarks running 5.5 cheaper to 4.0bp richer at the bell, pivoting around 7s.
• Swap spreads were mixed across the curve, tightening in the front end but widening a little further out the curve.
• The 2/10-Year swap curve moved deeper into inverted territory, printing fresh cycle extremes in the process, representing the most inverted level witnessed since ’08.
• Local headline flow was light ahead of tomorrow’s RBNZ decision. A reminder that the majority of analysts look for a 75bp rate hike ahead of the Bank’s three-month hiatus, with just under 70bp of tightening priced into RBNZ dated OIS for the event. Terminal OCR pricing prints just above 5.15% (see our full preview of that event here)
• Early Wednesday trade may see some adjustment to RBA Governor Lowe’s dinner time address, if there is anything in the way of notable trans-Tasman impetus generated.