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NZGBS: Slightly Richer, US Tsys Bull-Flatten On Friday, RBNZ Decision On Wednesday

BONDS

In local morning trade, NZGBs are 1-2bps richer after US tsys bull-flattened on Friday. There was no obvious driver for the move. Short covering, bargain hunting, and technical buying supported US tsys, with the 10-year yield declining 7bps to 4.25%. The front end underperformed ahead of 2- and 5-year auctions later today.

  • Swap rates are 4-5bps lower.
  • Today, the local calendar is empty, ahead of the RBNZ Policy Decision on Wednesday. Bloomberg consensus is nearly unanimous (19 of the 21 surveyed economists) in expecting a no-change result for the OCR. Only ANZ and TD are calling for a 25bp hike to 5.75%.
  • Shadow Board members recommended the RBNZ keep the OCR at 5.5% this week, the New Zealand Institute of Economic Research.
  • RBNZ dated OIS pricing is little changed across meetings. A 35% chance of a 25bp hike is priced for this week’s meeting, with an expected terminal OCR of 5.67% (a 68% chance of a hike) for the May meeting. A cumulative 39bps of easing is priced by year-end.
  • The calendar in Australia is also empty today, with January CPI (Wed) and Retail Sales (Thu) as the week's highlights.
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