NZGBS: Modest Cheapening, Swaps Twist Steepen

Cash NZGBs finished flat to 2.5bp cheaper cross the curve, with the belly leading the weakness. Friday trade was relatively limited, with the early, modest cheapening adjustment holding.

• Swap rates were 5bp lower to 2bp higher as that curve twist steepened. 2s were unwilling to force a test of cycle highs after yesterday’s GDP-inspired shunt higher, which made for mixed direction on the curve. This came as RBNZ dated OIS pricing eased at the margin (after yesterday’s push higher), with just over 70bp of tightening now priced for the Bank’s Feb ’23 meeting alongside a terminal OCR of 5.55%, which probably aided the easing in 2-Year swap rates.
• BusinessNZ manufacturing PMI data saw a deeper move into contractionary territory, while Nov non-resident bond holding data saw the % of NZGBs held offshore move to the highest level seen since ’18.
• Next week’s local docket is busy, and somewhat front-loaded in the runup to Christmas, with the monthly ANZ business & consumer confidence readings, trade balance data, monthly credit card spending prints, PSI survey and quarterly Westpac consumer confidence data all slated.