NZGBS: Local Matters Nullify Any Impulse From U.S. CPI

NZGBs have looked through the richening in U.S. Tsys, with the major NZGB benchmarks essentially unchanged across the curve after some incremental richening was witnessed at the open. This points to some tepidness re: today’s HYEFU, with the scene set for a more benign fiscal outlook based on a lower economic growth trajectory and higher borrowing requirements.

• This comes after Q3 saw the largest current account deficit share of GDP since records started (see our earlier bullet), as the major Q3 current account readings matched wider expectations.
• Swap rates are 3-4bp lower across the curve, resulting in tighter swap spreads across the term structure.
• RBNZ dated OIS continues to price ~68bp of tightening for the Bank’s Feb ’23 meeting and a terminal OCR of 5.40-5.45%, with the latter biased marginally lower in lieu of the softer than expected U.S. CPI prints and subsequent repricing re: Fed tightening expectations.
• The aforementioned HYEFU provides the highlight of today’s local docket.