NZGBs Twisting Flatter To Start

NZGBs twist flatten a touch to start the session, with the major cash NZGB benchmarks running 1.5bp cheaper to 2bp richer, pivoting around 7s.

• Swap rates are incrementally lower, leaving the major swap spreads flat to a touch tighter.
• Note that all of the big 4 NZ banks now look for the RBNZ’s OCR to peak at a minimum of 5.50% in the current cycle (5.50% is the peak OCR is the Bank’s own projected OCR track), with ANZ the most hawkish, looking for a terminal rate of 5.75%.
• Peak pricing for the cash rate in the RBNZ dated OIS strip hovers between 5.45-5.50%, while just over 70bp of tightening is priced in for the Bank’s next meeting (which will be held in Feb ’23).
• Post-meeting parliamentary testimony from RBNZ Governor Orr & chief economist Conway mimicked the post-meeting statement’s focus on inflation, with Orr highlighting that the OCR is now in contractionary territory.
• The highlight of today’s very limited domestic docket comes in the form of the weekly round of NZGB auctions, covering NZGB Apr-25, May-32 & Apr-37.