NZGBS: Risk-On & ECB Hike Pressure Yields Higher

NZGBs open 10-11bp weaker in line with higher U.S. Tsy yields as risk-on gained momentum after news that the First Republic Bank had secured a $30B rescue package. The push higher in global yields was also supported by the ECB going through with a 50bp hike despite banking concerns. The U.S. Tsy curve bear flattened with the 2-year yield 27bp higher and the 10-year yield +12bp.

• Swaps are 8-14bp higher with the 2s10s curve 6bp flatter.
• In line with global STIR developments overnight, RBNZ dated OIS has opened 8-9bp firmer across meetings. April meeting pricing is back to a 25bp hike despite weaker-than-expected Q4 GDP yesterday putting NZ on recession watch. Terminal OCR expectations have moved to 5.27%.
• The local calendar is light until February Trade Balance data on Tuesday. After the much larger than expected Q4 current account deficit (8.9% of GDP) and the resultant comments from S&P about bond rating pressure, the release will likely garner more than normal attention.
• Until then, the market will remain on banking headline watch ahead of Eurozone CPI (Feb) today, especially after ECB President Lagarde watered down tightening guidance. In the U.S., Industrial Production and the University of Michigan Sentiment are the slated data highlights.