NZGBS: Stronger, US Tsys Richer After ISM

NZGBs opened 4-7bp richer with the 2/10 curve 3bp flatter as US Tsys firm after lower-than-expected Manufacturing ISM data (46.3 versus 47.5 expected) offset OPEC+-induced weakness during the Asia-Pac trade. Oil prices gained 6% on Monday after the surprise decision by OPEC+ to cut production.

• After the bell, US Tsys were 6-7bp stronger but with US STIR still pricing a 63% chance of a 25bp hike at the May FOMC. Year-end easing expectations however increased by 4bp to 69bp.
• Swaps opened 2-3bp stronger, implying wider swap spreads particularly at the long end.
• Ahead of the RBNZ policy decision tomorrow RBNZ dated OIS pricing is flat to 4bp softer across meetings with April-24 leading. 27bp of tightening is priced for tomorrow’s meeting with terminal OCR expectations at 5.27%.
• The NZIER Quarterly Survey of Business Opinion just released showed a slight improvement in confidence (66% of firms expect the economy to deteriorate versus 70% previously). A net 69% of firms raised prices in Q1 with a net 61% expecting to raise prices in Q2. Market pricing was little changed after the data.
• The Antipodean calendar highlight today will be the RBA cash rate decision with the market largely priced for a no-change outcome.