March 10, 2023 04:04 GMT
NZGBS: Rally But Lag Tsys
NZGBs close at best levels with yields 9bp lower across the curve in line with a strong extension rally in U.S. Tsys in Asia-Pac trade as the market eyes softer equities (on the back of worries surrounding the U.S. banking sector) ahead of U.S. Non-Farm Payrolls tonight. On a relative basis, NZGBs underperform U.S. Tsys but tread water against ACGBs with the NZ/US 10-year yield differential +5bp and the NZ/AU at +84bp versus its 8-year high (+90bp) struck yesterday intraday.
- Swaps close at the richest levels with rates 11-12bp lower, implying tighter swap spreads, with the 2s10s curve unchanged.
- RBNZ dated OIS soften 5-6bp for meetings beyond July. Terminal OCR expectations pull back to 5.58% but remain above RBNZ’s projected OCR peak of 5.50%.
- On the local data front, expansion in the February Business NZ Manufacturing PMI quickened, as the headline index its highest reading in 5 months, but Q4 Manufacturing Volumes declined 4.7% Q/Q after a revised +2.6% in Q3.
- Next week sees a raft of releases locally with Q4 Current Account (Wed) and Q4 GDP (Thu) the highlights. BBG consensus for Q4 GDP is currently -0.2% Q/Q and +3.3% Y/Y.
- In the interim, the market will surely stay focused on U.S. Tsys through Non-Farm Payrolls tonight while eyeing global equity moves.