NZGBS: RBNZ View & Aussie Labour Market Sees Space Off Cheaps

The short end of the NZGB curve has been quick to pull back from session cheaps after KiwiBank suggested that the RBNZ should stand pat at this month’s meeting (“as we deal with the devastating impact of Cyclone Gabrielle. The RBNZ can come back in April and resume tightening if required”), although the bank does still expect the RBNZ to ultimately deliver a hike. Softer than expected Australian labour market data has also fed into the move from cheaps. Meanwhile, the longer end remains stickier, facilitating a steepening move, with the major benchmarks running 3-8bp cheaper across the curve as a result.

• Swap rates are 4bp lower to 3bp higher across the curve, comfortably off session highs, with swap spreads narrowing across the term structure.
• RBNZ-dated OIS has come in and is now showing 50bp of tightening for this month’s meeting, in lieu of the KiwiBank note, while terminal cash rate pricing is now below 5.30%, shedding over 10bp on the day.
• The weekly NZGB auctions present the immediate focal point for the space and may be limiting moves in secondary markets at present.