NZGBS: Weaker With Firmer Tightening Expectations

NZGBs close 4-8bp weaker but well off session cheaps as U.S. Tsys twist flatten in Asia-Pac trade. The 2/10 curve was 3bp flatter with the NZ/US 10-year yield differential -4bp. NZ/AU 10-year yield differential was -2bp at +96bp, just below the multi-decade high set after the worse-than-expected Q4 current account deficit print earlier in the week.

• Swaps are 4-15bp weaker, implying a wider short-end swap spread, with the 2s10s curve 10bp flatter.
• RBNZ dated OIS pricing firms 12-13bp across meetings in sympathy with global STIR and the ECB’s 50bp hike yesterday. April pricing shows 27bp of tightening with terminal OCR expectations at 5.32%.
• The local calendar is light until February's Trade Balance data on Tuesday. After this week’s current account deficit print and the resultant comments from S&P about bond rating pressure, the release will likely be closely watched.
• RBNZ Chief Economist Conway is slated to give a keynote speech: “The path back to low inflation in NZ” at a capital markets forum on 23 March.
• Until then, the market will remain on banking headline watch ahead of Eurozone CPI (Feb) today, especially after ECB President Lagarde watered down tightening guidance. In the U.S., Industrial Production and University of Michigan Sentiment are the slated data highlights.