NZGBS: Weaker But Continued Outperformance Vs. U.S. Tsys

NZGBs weaken on the day but close off session extremes, partly defying carry-over weakness for U.S Tsys in early Asia-Pac trade that pushed 5- to 10-year Tsy yields above Wednesday's NY session highs. With Q4 Terms of Trade surprising on the upside (the only local release), Resilience in NZGBs appeared linked to ACGB’s relative strength. Strong demand at the weekly NZGB auctions also aided the bid, with cover ratios of 2.9-3.2x seen across the NZGB May-28, Apr-33 & May-51 offerings.

• Cash NZGBs close 8bp weaker across the curve with continued outperformance noted versus U.S Tsys. The NZ/U.S. cash yield differential narrowed 4bp for the 2-year and 3bp for the 10-year. So far this week the 10-year NZGB benchmark has outperformed its U.S. equivalent by 16bp.
• Swap rates close 6-8bp higher, implying a slight short- to mid-curve swap spread narrowing.
• Subdued trading in RBNZ dated OIS continued today with pricing flat to 1bp firmer across meetings with April meeting pricing at 40bp of tightening and terminal OCR pricing just shy of the RBNZ’s projected OCR peak of 5.50% at 5.47%.
• ANZ consumer confidence data and a keynote address from RBNZ Governor Orr on "Navigating Heavy Seas: Sustainable growth, productivity and wellbeing for a stronger New Zealand" headline locally on Friday.