NZGBS: Off Session Cheaps

The major NZGB benchmarks cheapened by 4bp on Tuesday, with softer than expected retail sales data from across the Tasman likely allowing the space to correct from early session cheaps.

• The space generally looked through the latest cabinet reshuffle as the incumbent Labour Party looks to garner support ahead of this year’s general election, centring on new PM Hipkins putting his own mark on the ruling party post-Ardern (he named a Minister for Auckland as part of the post-flood rebuild push in the area).
• Swap rates were 2-6bp higher across the curve, with flattening apparent there, resulting in mixed swap spread performance.
• RBNZ dated OIS is showing 61bp of tightening for next month’s meeting, effectively a coin flip between a 50 or 75bp OCR hike. Meanwhile, terminal OCR pricing has edged back above 5.35%.
• Looking ahead, the latest quarterly labour market report headlines domestically on Wednesday. Unemployment is expected to hold steady at 3.3% (per the BG survey), with wage growth set to remain elevated even as Q/Q employment growth pulls back.