NZGBS: Strong U.S. Retail Sales Drive Yields Higher

NZGBs are 5bp cheaper across the curve this morning after U.S. Tsy yields pushed higher on the back of better-than-expected U.S. retail sales and hawkish rhetoric from U.S. Federal Reserve and ECB speakers.

• Swap rates are higher by 1-3.5bp with the 2s10s curve 2bp steeper.
• The lingering impact of the moderation in the RBNZ’s Survey of 2-year inflation expectations continues to be observed, with 54bp of tightening now priced for this month's meeting, while terminal OCR pricing sits just below 5.40%.
• Locally, the attention remains focused on the aftermath of Cyclone Gabriel which left a wave of destruction in the North Island. The government continues to assess the damage, both socially and economically.
• For the markets, the focus will likely remain on the strong household demand induced weakness in U.S. Tsys, at least until the release of January Australian employment data later today.
• The NZ Debt Management Office is due to auction the following NZGBs today: NZ$200mn May-28, NZ$150mn Apr-33 and NZ$50mn Apr-37.