NZGBS: Uptick In Tsys Allows Move Off Lows

NZGBs finished 4.5-6.5bp cheaper on Wednesday, with a light bear flattening impulse developing as the day wore on. Swap rates were 5-8bp higher, also flattening, leaving swap spreads little changed to a touch wider across the curve.

• The initial cheapening impulse, derived from the trans-Tasman feedthrough from yesterday’s RBA decision, moderated on the back of a bit of a bid in U.S. Tsys during Asia-Pac dealing, as regional participants looked to the lack of firm pushback from Fed Chair Powell vs. the dovish reaction to last week’s FOMC.
• RBNZ dated OIS nudged higher on the day, showing 58bp of tightening for later this month, alongside a terminal OCR of just over 5.25%.
• Local headline flow was dominated by Prime Minister Hipkins unwinding some of ex-PM Ardern’s policies, including the income insurance scheme, while he increased the minimum wage in line with CPI. Hipkins stressed that “the government is refocusing its priorities to put the cost of living front and centre of our new direction,” while underscoring the need for “increased support for business, increased support for those on low incomes and a reprioritization of our work program to shift it to the bread-and-butter issues New Zealanders want us focused on.”
• The latest ANZ Truckometer reading provides the only economic data point on tomorrow’s local docket, although that won’t be a market mover.