NZGBS: Twist Steepening Seen, Shielded From BoJ, Swap Rates Not So Privileged, Shunt Higher

NZGBS were insulated from the fallout from the latest BoJ decision, owing to the closing time of the market. This came after an all-time low headline ANZ business confidence reading, in lieu of the whirlwind round of tightening from the RBNZ, allowed the space to recover from the early session cheaps, which came as local participants reacted to Monday’s wider cheapening in core global FI markets.

• Swap rates weren’t sheltered from the initial post-BoJ impulse, as they pulled away from their session base, finishing 3-11bp higher, with some notable steepening evident, facilitating a further pull away from the post GFC lows in the 2-/10-Year swap spread.
• RBNZ dated OIS pricing was little changed on the day, with ~72bp of tightening priced for the Feb ’23 meeting alongside a terminal OCR of ~5.55%.
• Looking ahead, Wednesday’s local docket will be headlined by monthly trade balance data, the latest consumer confidence print from ANZ and credit card spending readings, although the delayed reaction to the BoJ move will likely dominate local matters.