NZGBs Off Best Levels, 10s Underperform On Uncovered Auction

NZGBs worked away from richest levels of the session, leaving the major benchmarks flat to 7bp firmer on the day come the bell.

• A very modest round of cheapening in U.S. Tsys (after a notable post-Powell rally extended on month-end extension-based demand into the NY close) initially helped the space away from best levels.
• There were also some idiosyncrasies at play, with an uncovered round of NZGB-33 supply resulting in underperformance for the 10-Year zone on the curve (as that benchmark finished virtually unchanged on the day), while NZGB-27 & May-51 supply passed smoothly, with the latter particularly well received.
• Swap rates pulled back from session lows but were still 2-5bp lower on the session, resulting in mixed swap spread performance.
• RBNZ dated OIS eased in lieu of Fed Chair Powell’s Wednesday address, with ~62bp of tightening priced in for the Bank’s Feb ’23 meeting, while terminal rate pricing eased to just over 5.35%, as both measures shed 5bp or so on the day.
• Looking ahead, quarterly terms of trade data headlines Friday’s domestic docket.