NZGBS: Sharply Richer With US Tsys Despite FOMC’s High Bar For A March Cut

In local morning trade, NZGBs are 4-5bps richer following the FOMC meeting. This comes after US tsys finished Wednesday on a strong note, with a steeper curve. Yields were 7-12bps lower, with the 2-year finishing at 4.21% and the 10-year at 3.92%.

• The Fed left the funds rate unchanged as universally expected and released a more neutral statement. Fed Chair Powell said policymakers were unlikely to pivot to rate cuts in March. The FOMC stated: “the committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%”.
• US tsys had strengthened early in the NY session after a lower than expected ADP Employment Change: 107k vs. 135k est (prior down revised to 158k from 164k). Further support came after the Tsy Quarterly Refunding announcement and Employment Cost Index at 0.9% vs. 1.0% est.
• Swap rates are 4bps lower.
• RBNZ dated OIS pricing is 1-5bps softer across meetings, with October leading. A cumulative 95bps of easing is priced by year-end.
• NZ residential property prices declined 2.7% y/y in January, according to CoreLogic.
• Today, the NZ Treasury plans to sell NZ$250mn of the 4.5% May-30 bond, NZ$175mn of the 3.5% Apr-33 bond and NZ$75mn of the 2.75% May-51 bond.