NZGBS: Slightly Cheaper, US Markets Closed For Holiday On Monday

In local morning trade, NZGBs are 2bps cheaper after US tsy futures drifted weaker on Monday, with trading conditions light. US markets were closed for the Martin Luther King public holiday.

• In FX, the USD was broadly stronger, with the JPY, AUD and NZD underperforming.
• Elsewhere, the PBoC surprised the market yesterday by keeping the 1-year lending rate at 2.5%. There was widespread expectation for a 10bp cut. Concerns that a further cut may undermine the yuan possibly drove the decision.
• A preliminary estimate showed Germany’s economy declined 0.3% in Q4. It narrowly avoided a technical recession in the second half of last year after Q3 was revised to 0% from negative 0.1%.
• Swap rates are 4bps higher.
• RBNZ dated OIS pricing is slightly firmer across meetings.
• NZIER Business Opinion Survey for Q4 showed a sharp pick-up in confidence. The outlook for the economy improved for the fourth straight quarter as demand lifted and labour was easier to find. A net 33% said it was easier to find unskilled workers. Inflation pressures were also seen easing with fewer firms reporting rising costs and fewer planning to raise prices in the current quarter.