NZGBs Little Changed Vs. Pre-PPI Levels, Holding Richer On The Day

Wednesday’s bid in the longer end of the U.S. Tsy curve has allowed NZGBs to firm in early Thursday trade, with the major cash benchmarks running 2.5-6.0bp richer as 10s outperform.

• Swap rates have outstripped the move lower in NZGB yields, resulting in a round of swap spread tightening to start the day.
• Today’s headline domestic data release has been and gone, with PPI slowing a touch in Q/Q terms during Q3 (+1.6% Q/Q for output prices, +0.8% Q/Q for input prices).
• NZGB yields are incrementally higher in the wake of the data, with inflation still clearly running at elevated levels.
• RBNZ dated OIS continues to price just under 65bp of tightening for next week’s meeting, in line with levels witnessed late yesterday. Terminal OCR pricing is also little changed from levels witnessed late Wednesday, hovering just below 5.05%.
• Participants will be on the lookout for any trans-Tasman impetus in lieu of today’s Australian labour market data.