NZGBS: Outperform Vs. $-Bloc Peers

NZGBs stage an across the curve strengthening with yields down 6-7bp at the close. With the local news light and U.S. Tsys flat in Asian trading, the cumulative rise in NZGB yields over the past week (+35-40bp) and the narrowing in the gap between market pricing and the RBNZ’s projected OCR path appear to be likely drivers of today’s rally, along with the lead from Monday's light richening in Tsys. NZGBs outperformed across the curve versus its $-bloc peers with the NZ/US cash yield differential narrowing 3bp in the 2-year and 5bp in the 10-year. Cash NZGB 10-year outperformed Australia by 4bp.

• Short to mid-curve swaps outperformed, with rates 5-7bp lower and the curve 5bp steeper.
• RBNZ dated OIS is 2-6bp lower across meetings with August leading as terminal rate pricing re-coiled from a level just shy of the RBNZ’s projected OCR peak of 5.50% to close at 5.43% (after touching the RBNZ's 5.50% projection yesterday). April meeting pricing is 2bp lower at 38bp of tightening.
• On the local docket, the ANZ Business Outlook Survey delivered an improvement but the underlying story of an economy with subdued confidence and high inflationary pressures remained. Moreover, the results are unlikely to fully reflect the impact of the recent cyclone.
• The local calendar delivers CoreLogic House Prices (Feb) and Building Permits (Jan) tomorrow. While the market is keen to get an update on the impact of RBNZ tightening, the data pre-dates much of the recent severe weather. Recent permit data had shown increasing caution from developers and purchasers.