NZGBS: Stronger Ahead Of Q4 GDP Data

NZGBs open 10-15bp stronger, with the 2/10 curve 4bp steeper, as U.S. Tsys surge on softer than expected data and a sharp sell-off in European banks. After making new highs for the week, U.S. Tsys scaled back their advance on reports that Swiss officials FINMA would provide liquidity to Credit Suisse.

The NZ/US 10-year yield differential has widened 10bp, continuing yesterday’s underperformance sparked by current account deficit and bond rating concerns.

• Swaps are 14-17bp richer, implying tighter swap spreads, with the 2s10s curve 4bp steeper.
• Locally, Q4 GDP is out soon (2145 GMT). After remaining surprisingly resilient in the face of aggressive tightening, recent data has become patchier with December quarter declines for retail sales, manufacturing, and construction.
• With BBG consensus expecting -0.2% Q/Q (3.3% Y/Y) versus the +0.7% forecast by the RBNZ in its February MPS the local market has potentially a domestic driver to focus on alongside global banking contagion concerns.
• RBNZ dated OIS pricing is 10-23bp softer with meetings beyond May leading. April meeting pricing declines to 15bp of tightening from 25bp yesterday.
• The NZ Treasury is scheduled to auction NZ$200mn of the 0.25% 15 May 2028 bond, NZ$150mn of the 3.5% 14 April 2023 bond and NZ$50mn of the 2.75% 15 May 2051.