NZGBS: Off Cheaps After Long Weekend Catch Up, RBA To Impact On Wednesday

NZGBs finished off cheapest levels on Tuesday, with the initial post-long weekend move reflecting the weakness observed in global core FI markets in lieu of Friday’s firmer than expected U.S. economic data, as well as reaction to the latest rounds of Fed, ECB & BoE speak. Still, core global FI found a bit of a base in the early rounds of wider Asia-Pac dealing, which allowed NZGBs to finish 14-17bp cheaper across the curve, with bear flattening in play. The local close came before the latest RBA decision across the Tasman, which pressured ACGBs, a move likely to be reflected in NZGBs come tomorrow’s local open (new flow & wide market-dependent).

• Swap rates were 16-17bp higher in a parallel shift, also finishing off session extremes, leaving swap spreads flat to wider on the day.
• RBNZ-dated OIS indicates ~55bp of tightening for this month’s decision, alongside a terminal OCR of ~5.25%, higher vs. Friday’s closing levels in lieu of the repricing of global central bank expectations witnessed in that window. Once again, these marks will likely be adjusted higher in reaction to the RBA decision during early Wednesday trade.
• There wasn’t much in the way of meaningful domestic headline flow to trade off, which left post-weekend adjustments at the fore.
• Looking ahead, there is nothing of note on the local docket on Wednesday.