NZGBS: Weaker As ISM Prices Paid Pushes U.S Tsy Yields Higher

NZGBs open 4bp weaker across the curve. This comes in the wake of U.S. Tsys closing near session cheaps after the ISM prices paid sub-index jumped to 51.3 from 44.5, with the U.S. Tsy 10-year yield higher by 8bp at the bell. NZGBs continue their recent outperformance versus U.S. Tsys with the cash 10-year yield differential narrowing by 4bp. Weaker U.S. Tsys versus softer local data, aided by stronger ACGBs, has delivered a 13bp outperformance for the NZGB 10-year benchmark this week.

• Swap rates open 3bp higher, implying a slight narrowing in swap spreads, with the 2s10s swap curve unchanged.
• After subdued trading yesterday despite AU OIS moves, RBNZ dated OIS sits unchanged across meetings with April meeting pricing at 39bp of tightening and terminal OCR pricing just shy of the RBNZ’s projected OCR peak of 5.50% at 5.47%.
• Q4 Terms of Trade data is the highlight of the local calendar today. With commodity prices weaker at the end of 2022 another quarterly decline is expected after a -3.4% Q/Q decline in Q3.