NZGBS: Twisting Flatter Into The Weekend

The cheapening witnessed in the wider core global FI space saw NZGBs soften as Friday’s session wore on, although the early twist flattening impulse held, with the major benchmarks running 6bp cheaper to 4bp richer, with a pivot observed around 7s.

• Meanwhile, the swap curve saw rates run lower to unchanged, with a light steepening impulse seen. That left swap spreads a little tighter in the front end, but marginally wider further out.
• RBNZ dated OIS continues to price just over 70bp of tightening for the RBNZ’s Feb ’23 meeting, with a terminal rate of just under 5.50% eyed. The recent repricing probably helped bias front end NZGBs lower, alongside the wider weakness in bonds.
• Local data saw the ANZ consumer confidence reading hit the lowest level observed since June. The survey collator noted that “sharp increases in the cost of living and interest rates (not to mention falling house prices) are clearly hurting confidence, but excellent job security and strong wage growth have so far seen spending hold up far better than this level of confidence would normally imply. This dynamic is likely to be on borrowed time.”
• Elsewhere, Q3 retail sales volume data was virtually in line with exp., rising by 0.4% Q/Q (the BBG survey median looked for a reading of +0.5%).
• Next week’s domestic docket includes the ANZ business survey, building permits, terms of trade and CoreLogic house price data.