NZGBS: Playing Catch-Up To Events in AU & US

NZGBs open 3bp weaker across the curve in what could be a volatile session as the market plays catch up with developments in AU and U.S. since yesterday's local close. The 10-year benchmark's relative performance is mixed against its $-bloc peers with the NZ/US yield differential 3bp tighter and the NZ/AU differential 5bp wider. Yesterday, the RBA hiked by 25bp but surprised the market with a dovish shift in policy guidance, opening the door to a pause as early as April. The ACGB market rallied strongly on the news. In sharp contrast, Fed Chair Powell in his testimony to congress canvassed the possibility of larger, faster hikes and a higher terminal rate. The U.S Tsy curve extended its inversion to levels last seen in 1981 2-Year yield lifting 12bp to above 5.0%.

• Elsewhere, RBNZ Governor Orr spoke at a private event overnight, but provided no new information.
• Swaps open 3-5bp lower, with the 2s10s curve 2bp flatter.
• With the strongly divergent messages from the RBA and the Fed since the local close RBNZ-dated OIS has opened 2bp firmer across meetings with April still pricing 40bp of tightening. More noteworthy, terminal rate expectations have pushed above the RBNZ’s projected OCR peak.
• With no local data today, attention will turn to RBA Governor Lowe’s speech at the AFR Business Summit, which has just got underway.