NZGBS: Off Best Levels As China Reopening Hope Takes Edge Off Soft U.S. Data

NZGBs unwound some of the early richening on Monday, with Antipodean rates seemingly looking to Chinese reopening hopes (in the form of an uptick in HK & Chinese equities), given the lack of fresh core global FI cures owing to a Tokyo holiday and related closure for U.S. cash Tsys until London hours.

• Local news flow remains subdued to start ’23, with Synlait marking down its dairy price forecast for the current year providing the only point of note today.
• There may have also been a degree of rates moving too far, too fast in the early rounds of ’23 trade, facilitating a move away from intraday richest levels which came as NZ market participants adjusted to Friday’s soft U.S. wage data & ISM services survey.
• That left the major benchmarks 7.0-8.5bp richer at the close, with light bull steepening in play.
• Swap rates also pulled back from session highs, leaving the major benchmarks on that curve running 6.0-7.5bp lower on the day, as swap spreads ran flat to a touch wider.
• RBNZ dated OIS generally operated close to late Friday levels, with a slight softening bias, leaving 67bp of tightening priced for next month’s meeting, alongside a terminal OCR of just under 5.00%.
• Looking ahead, REINZ house price data, the monthly ANZ commodity price index and building permits data headline this week’s limited domestic docket.