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NZGBS: Mid-Session Reversal On Aussie Data


NZGBs reversed morning weakness in line with the post-data rally in ACGBs. Trans-Tasman downside surprises in Q4 GDP and more importantly, monthly CPI, sparked a short-end led rally in ACGBs as it threw weight behind the RBA’s forecast that inflation peaked in Q422. NZGBs followed suit with yields 4-5bp lower at the close, versus 4-5bp higher in early trade. The 2/10 cash curve was 1bp steeper. There was no real reaction to firmer than expected Chinese PMI data.

  • NZGBs added to yesterday’s outperformance versus U.S. Tsys with the NZ/US cash yield differential narrowing 9bp for the 2-year and 5bp for the 10-year. The NZ-AU 10-year differential did however widen 3bp, unwinding yesterday’s narrowing.
  • Swaps close 4-7bp lower, implying a slight narrowing in swap spreads, with the 2s10s curve 1bp flatter.
  • RBNZ dated OIS ignored trans-Tasman moves to close a little firmer across meetings. April meeting pricing remains at 38bp of tightening with terminal OCR pricing back close to the RBNZ’s projected OCR peak of 5.50% at 5.47%.
  • Today's local data was weak. CoreLogic’s house price index sank -8.9% Y/Y, the steepest annual decline since 2009, while January Building Permits recorded another M/M fall. Some rebound had been expected after the sharp decline in multi-unit consents in December. Today’s data pre-dated much of the recent severe weather.
  • Elsewhere, the Treasury announced the appointment of JLMs for the syndication of the new May-30 NZGB, with expectations for the launch to take place next week, subject to market conditions.

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