NZGBS: Near Enough Flat To Start Amid Thinner Liquidity

NZGB yields are flat to 1bp lower across the curve in early Monday trade, with swap rates displaying a similar round of limited moves, as liquidity is hampered by the observance of a regional holiday in Auckland. This comes after U.S. data triggered a bit of a reversal in the early cheapening observed in U.S. Tsys on Friday.

• Locally, weekend rainfall in the Auckland region will no doubt exacerbate supply chain issues that are already well-documented, while creating some demand-pull price pressures as well. Could this impact the RBNZ’s Feb decision, even after Q4 CPI printed below the central bank’s assumptions? RBNZ dated OIS is currently showing ~61bp of tightening for the event, or just under a 50/50 chance of a 75bp step, little changed from late Friday levels, while terminal rate pricing continues to hover around 5.35%.
• Trade balance data has been and gone, with New Zealand racking up a seventh straight monthly trade deficit in December, albeit well off the all-time wides seen earlier in ’22.
• The Q4 labour market report provides the domestic highlight of the week, with ANZ consumer confidence, building permits and CoreLogic house price data filling out the domestic docket at different points.