NZGBS: Weaker Ahead Of RBNZ Monetary Policy Statement

NZGBs opened flat to 3bp cheaper after US tsys showed minimal movement in NY trading, preceding the release of the FOMC Minutes and crucial US inflation data later this week.

• There was a slight decrease in risk appetite due to ongoing concerns about the unresolved debt ceiling negotiations, which continue to dominate headlines. Republicans have stood firm on their stance against any tax changes, making a deal elusive, as emphasised by McCarthy, while Democrats strive to increase revenues and reduce spending.
• Local participants will focus on today’s RBNZ Monetary Policy Statement (MPS) at 0300 BST. Economists surveyed indicate a higher likelihood of a 25bp rate hike compared to a 50bp hike, while pricing in the OIS market is evenly balanced between these two potential outcomes. The market has positioned itself for the central bank to revise its rate projections upward, as reflected in a peak OCR priced at 5.94%, surpassing the RBNZ's projected peak of 5.5% as of February.
• Swap rates are 4bp higher with implied swap spreads wider.
• Prior to the release of the MPS, Q1 real retail sales data, although not expected to generate significant market enthusiasm due to their timeliness, will provide insights into the extent of the economic weakness in Q1.