NZGBS: Richer, Catching Up To U.S. Data

Benchmark NZGBs run ~12bp richer across the curve as the market adjusts to Friday’s softer than expected U.S. wage data and ISM services survey, with the latter revealing a surprise contraction in headline terms, as new orders cratered.

• Swaps lag the move in NZGBs, resulting in swap spread widening, moving 8-11bp lower early on, as that curve flattens.
• RBNZ dated OIS is incrementally lower in lieu of the U.S. data & subsequent move in market pricing re: the U.S. Fed, with 66bp of tightening now pieced for the Feb ’23 RBNZ gathering, alongside terminal OCR pricing of ~5.50%.
• The local docket is empty on Monday, with nothing in the way of meaningful domestic news flow to digest from the weekend. Meanwhile, second tier data from across the Tasman is unlikely to be a needle mover for Antipodean rates, which will leave focus on headline flow and cross-market dynamics.
• Looking further ahead, REINZ house price data, the monthly ANZ commodity price index and building permits data headline this week’s limited domestic docket.