NZGBS: Swap Spreads Widen A Touch Ahead Of RBNZ

NZGBS nudged away from session cheaps on the latest round of COVID developments in China. However, the move in the space was very limited, leaving the major benchmarks 2.0-3.5bp cheaper at the bell, as the curve bear flattened after some initial catch up to Friday’s cheapening in U.S. Tsys.

• Swap rate moves were marginally more pronounced, resulting in some light swap spread widening across the curve. This may have been a result of some pre-RBNZ hedging via payside swap flow.
• A reminder that the wider consensus looks for a 75bp hike in the OCR at this week’s RBNZ meeting, before the Bank’s 3-month hiatus.
• Just over 65bp of tightening is priced into RBNZ dated OIS covering this week’s meeting, with a terminal rate of just over 5.10% priced. Both measures were incrementally higher vs. late Friday levels.
• Looking ahead, monthly trade balance data headlines the domestic docket on Tuesday.