NZGBS: Stronger But Underperforming $-Bloc Ahead Of Syndication Pricing

NZGBs close 3-8bp richer with the 2/10 cash curve 5bp flatter. While the 2-year retraced some early strength, the 10-year closed near its richest level aided by a post-auction bid for ACGBs and some light U.S Tsy strength in Asia-Pac trade. The stronger tone to global FI could reflect China’s official 2023 annual growth target of “around 5%” (less ambitious end of expectations).

• The NZGB 10-year benchmark did however underperform its $-bloc peers, ahead of tomorrow’s pricing of the new May-30 bond (sized at a minimum of NZ$3.0bn, capped at NZ$5.0bn). The NZ/US and NZ/AU 10-year yield differentials were 3bp and 4bp wider, respectively.
• Swaps bull flatten with rates 2-10bp lower, leaving the 10-year swap spread slightly tighter and the 2s10s swap spread box slightly flatter.
• RBNZ dated OIS was flat to -2bp across meetings led by August. April meeting pricing remains around 40bp of tightening with terminal OCR pricing just shy of the RBNZ’s projected OCR peak of 5.50% at 5.49%.
• Q4 construction data printed -1.6% Q/Q today, but any message from this data is likely to be discounted given the upside bias to the outlook as NZ rebuilds from recent severe weather devastation.
• With the local calendar light until February’s card spending data (Thu) and Manufacturing PMI (Fri), the market will likely find itself guided by events in Australia and the U.S.