NZGBS: Sharply Cheaper, US Tsys Heavy Ahead Of Supply

In local morning trade, NZGBs are 6-8bps cheaper after US tsys saw losses of 4-5bps across benchmarks to start a holiday-shortened week. US bonds were heavy ahead of supply amid anxiety over the FOMC's policy path with risk the Fed does not cut rates the 3 times projected by the dots this year.

• Comments from Fed Bostic supported that chance too, as he revised his outlook for only 1 easing, versus 2 previously. While Fed Cook said officials must cautiously balance the risk of easing monetary policy too much or too soon, allowing inflation to linger above target, and taking too long to ease, which could harm the economy needlessly and deprive people of economic opportunities.
• Swap rates are 3-6bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is flat to 3bps firmer across meetings, with Feb-25 leading. A cumulative 68bps of easing is priced by year-end.
• NZ PM Luxon and Fin Min Willis spoke about the upcoming Budget Policy Statement. Luxon outlined commitments to protect frontline services, provide tax relief, and prioritize economic growth, while Willis underscored the government's aim to correct structural budget deficits and ensure fiscal sustainability through gradual budget adjustments.
• Today, RBNZ Chief Economist Paul Conway speaks to a Chartered Accountants event.