NZGBS: Slightly Cheaper, US Tsys Little Changed After Dec FOMC Minutes

In local morning trade, NZGBs are showing a slight bear-steepening, with yields flat to 2bps higher, after US tsys finished little changed. The NY session saw choppy trading after the December FOMC Minutes release.

• The minutes were balanced but with a dovish tone as officials noted diminished inflation and the need to start a discussion of QT wind down.
• AFR reported that Morgan Stanley said the minutes increased the emphasis that policymakers are not preparing to cut interest rates soon. “While risks to growth and inflation have come into better balance, they are still highly attentive to inflation risks and see risk to rates staying at current levels for longer than anticipated. We continue to expect the Fed to deliver the first cut in June.”
• Projected rate cuts for early 2024 firmed slightly: January 2024 cumulative -2.1bp at 5.307%, March 2024 chance of rate cut -72.1% vs. -65.4% (-84.3% last Friday) w/ cumulative of -19.7bp at 5.132%, May 2024 chance of cut back to -94.8% vs. -87.2% immediately after the release, cumulative -42.9bp at 4.900%, June'24 cumulative -67.5bp at 4.653%.
• Swap rates are unchanged, with the long-end implied swap spread tighter.
• RBNZ dated OIS pricing is little changed.
• Today, the local calendar is empty.