NZGBS: Richer But Closed At Session Cheaps, Awaiting US CPI Data

NZGBs closed richer but at session cheaps, with benchmark yields 3-5bps higher. Despite a flurry of domestic news, including updates on REINZ house prices, food prices, and the release of the RBNZ annual report, none of these factors significantly impacted the market.

• Local participants seemed to be more attuned to the developments in US tsy dealings during the Asia-Pac session, especially in the wake of yesterday’s twist flattening.
• US tsys have been marginally pressured in recent dealing, although there hasn’t been any headline driver. Perhaps local participants are using the recent richening to close long positions ahead of this evening’s CPI print. Cash US tsys sit ~1bp cheaper across the major benchmarks.
• It's worth noting that NZGBs exhibited a slight underperformance versus US tsys, with the NZ-US 10-year yield differential finishing 1bp wider.
• The relatively low cover ratios, in the 2.5-3.0x range, seen at today’s bond auctions possibly contributed to the weaker relative performance.
• Swap rates closed 1-6bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed flat to 2bps softer across meetings. Terminal OCR expectations closed 1bp softer at 5.69%.
• Tomorrow, the local calendar sees Business NZ Mfg PMI and Card Spending data.
• Before that, attention turns to the release of US CPI data for September later today.