NZGBs Off Lows But Still Cheaper, Swap Spreads Narrow Again

NZGBs found a base after the initial cheapening witnessed on Thursday, with early trade driven by the space’s reaction to Wednesday’s monetary policy decision from the U.S. Federal Reserve and some pre-NZGB auction concession.

• Asia-Pac macro news flow (centred on the latest North Korean missile launch, weaker than expected Caixin services PMI data out of China and China’s continued focus on pursuing its zero COVID strategy) then allowed the broader core global FI space to find a little bit of a base as the session wore on, with the smooth passage of today’s NZGB supply (covering ’28, ’33 & ’51 paper) also helping the space correct from session cheaps.
• Swap spreads were narrower on the day as the push higher in swap rates lagged the move in NZGB yields, with the spread narrowing theme seen since the official inclusion of NZGBs in the WGBI extending.
• The pricing for the terminal OCR rate observed via RBNZ dated OIS edged higher today, in sympathy with moves in U.S. Fed terminal rate pricing post-FOMC, to print around 5.25%.
• RBNZ Governor Orr’s appearance in front of parliament after the release of the FSR had no tangible impact on the space, with familiar rhetoric deployed.
• Friday’s local docket is empty.