NZGBS: Pressured As GDP Hawkishly Reshapes RBNZ Pricing

NZGB yields shifted higher on Thursday, with NZ GDP data, regional reaction to the FOMC meeting and some trans-Tasman impetus in lieu of a firm round of Australian labour market data all applying pressure at different points in the day.

• That left the major cash NZGB benchmarks 14.5-16.5bp cheaper across the curve at the close, with the wings leading the weakness.
• Swap rates were 13-16bp higher across that curve, with some flattening apparent, leaving swap spreads little changed to a touch narrower.
• This came as RBNZ dated OIS shunted higher, to virtually fully price a 75bp hike at the Feb ’23 meeting, alongside a peak OCR of just below ~5.60%, as the market eyes the potential for a more pronounced round of monetary tightening in a bid to “cool the jets” after the much firmer than expected GDP print (which blew all expectations, including that of the RBNZ, out of the water).
• Today’s NZGB supply (covering NZGB Apr-27, Apr-33 & May-51) saw cover ratios between 1.50-2.00x, representing smooth, albeit relatively vanilla, reception of the auctions.
• Friday’s local docket will headlined by m’fing PMI and non-resident bond holding data.