NZGBs Off Best Levels, Bull Steepening

NZGBs followed the global pullback from their U.S. CPI-inspired richest levels of the session, with the major benchmarks going out 16-22bp richer as the curve bull steepened. Swap spreads were little changed to a touch narrower across the curve.

• RBNZ dated OIS was little changed after the early adjustment lower, which was also inspired by Thursday’s U.S. CPI readings. Just over 60bp of tightening is priced for this month’s RBNZ meeting, with terminal rate pricing now sitting at ~5.05%.
• Local data saw an uptick in the M/M rise in food prices (+0.8% M/M in Oct vs. +0.4% in Sep), while the BusinessNZ manufacturing PMI moved into contractionary territory for the first time in over a year. The collators of the PMI noted that “new orders are falling while the PMI stocks index remains expansionary and firmly above its long-term norms. A low orders-to-inventory ratio typically bodes ill for production ahead.”
• Local news flow saw the Government announce that Kainga Ora’s future financing requirements will be met by loans from New Zealand Debt Management (NZDM), rather than private markets. Spreads of the entities bonds narrowed vs. NZGBs on the news.
• REINZ property market data, the quarterly PPI reading and non-resident bond holding data headline next week’s local docket.