NZGBS: Weaker Ahead of Heavy Global Calendar

NZGBs close near cheaps as the market looks to U.S Tsys for guidance heading into a next week’s heavy global calendar.

• Comments from RBNZ Governor Orr before market hours saw a marginally less hawkish message of “early signs of price pressures easing”, but U.S. Tsys were the driver today.
• Cash benchmarks close 7-9bp weaker across the curve, underperforming U.S Tsys. After narrowing from +26bp last Friday to an intraday low of flat yesterday, the NZ/US cash 2-year yield differential closes the week +10bp wider on the day at +15bp. The 10-year differential mapped out a similar path, closing in the middle of the week’s +54-74bp range.
• 2s10s swap curve bear steepens with rates +5-8bp higher, implying a 1-2bp tightening in swap spreads.
• RBNZ-dated OIS was subdued with pricing flat to 2bp firmer across meetings, leaving April meeting pricing at 40bp of tightening and terminal OCR pricing at the RBNZ’s projected OCR peak of 5.50%.
• A busy calendar of Antipodean and global data and events is seen next week. In Australia, all eyes will be on the RBA decision (Tue) and Governor Lowe’s speech at the AFR Business Summit (Wed). On the global calendar, the highlights will be Fed Chair Powell’s semi-annual Monetary Policy Reports to Congress (Tue & Wed), BoC’s decision (Wed), China’s CPI (Thu) and U.S. Payrolls (Fri).