NZGBS: Steady Ahead of U.S. PCE Deflator

The NZGBs closed near session bests within a narrow range, with benchmark yields unchanged as U.S. Tsys marked time ahead of the release of the U.S. PCE deflator later in the day. NZGBs did however underperform their counterparts in the $-bloc, with the NZ/US and NZ/AU 10-year yield differentials widening by 1bp and 3bp respectively.

• Swaps were flat to 1bp cheaper on the day.
• The RBNZ dated OIS had a subdued session, with pricing little changed across meetings. The April meeting is priced for a 25bp hike, with terminal OCR expectations at 5.27%.
• According to a Reuters poll of economists, the RBNZ is expected to reduce the hike to 25bp next week. However, there is a split among economists on whether there will be another 25bp hike in May.
• On the local data front, the ANZ Consumer Confidence was weaker in March, with rising interest rates and higher cost of living being the reasons.
• The Antipodean calendar is light ahead of the RBA rates decision on Tuesday and the RBNZ decision on Wednesday.
• Until then, the market will be focused on the release of Euro Area CPI for March and the U.S. PCE deflator for February. The focus will be on core measures.