NZGBS: Mildly Cheaper, Debt Ceiling Impasse Continues

NZGBs opened 1bp weaker after a mildly weaker close for US tsys in NY trade. The 2-year US tsy yield has reached a two-month high, currently standing at 4.32%.

• President Biden and House Speaker McCarthy will meet later this morning on debt ceiling negotiations, which encountered a hurdle over the weekend. It seems that their positions remain a distance apart.
• Although Fed Chair Powell's remarks last week suggested a likely pause, market expectations for a 25bp hike at the FOMC in June are gradually increasing (currently at 22%). Overnight, Fed Bullard, a non-voting member for 2023, expressed support for two additional 25bp rate hikes. Similarly, Fed Kashkari, a voting member for 2023, hinted at his inclination towards further monetary tightening.
• The minutes of the FOMC meeting and the PCE deflator, both scheduled for release this week, have the potential to influence market expectations concerning near-term interest rate hikes as well as potential cuts.
• Swap rates opened 1-2bp higher with the implied swap spread box steeper.
• The Antipodean calendar is light ahead of the RBNZ policy meeting tomorrow. BBG consensus expects a 25bp hike to 5.50%, although ASB expects a 50bp hike.
• RBNZ dated OIS opened 1-3bp firmer across meetings with 34bp priced for tomorrow’s meeting. Terminal rate expectations sit at 5.87%.