NZGBS: Off Cheaps, Outperforming $-Bloc

NZGBs closed mid-range 5-8bp cheaper with the 2/10 curve 3bp flatter after U.S. Tsys recouped a portion of NY session losses in Asia-Pac trade. NZGBs nonetheless outperformed its $-Bloc peers with the NZ/US and NZ/AU 10-year yield differentials respectively -9bp and -7bp on the day.

• Swaps closed at session bests 2-4bp weaker, implying tighter swap spreads.
• RBNZ dated OIS closed 4-8bp firmer for meetings beyond April with October leading. 24bp of tightening was priced for April with terminal OCR expectations pushed out to 5.20%.
• The NZ calendar remains light until later in the week with the next major release, not until ANZ Business Confidence and Building Consents on Thursday.
• Before then, Australia is scheduled to release CPI Monthly for February tomorrow. BBG consensus is expecting another slowing in the Y/Y rate to 7.2% from 7.4% in January and 8.4% in December.
• With the global calendar relatively light until Friday when Euro Area CPI (Mar) and US PCE deflator (Feb) are released, the markets will be closely watching to see if the recent improvement in risk sentiment, and upward pressure on global yields, can extend further.