Strong Demand At Auctions Helps Early NZGB Bid Extend

NZGBs firmed further as we moved through Thursday’s session, with the major benchmarks running ~15bp richer on the day come the close. Swap spreads were flat to a touch wider.

• The bid in NZGBs was aided by strong demand at the weekly round of NZGB auctions (covering NZGB-25, -32 & -37).
• Terminal OCR pricing in RBNZ dated OIS came in a touch, to print just below 5.30%. at the local close
• A reminder that the RBNZ published the review of its monetary policy settings in the 2017-2022 window. RBNZ chief economist Conway noted that “the current heightened level of inflation could have been lessened at the margin by an earlier tightening in monetary policy in 2021. However, while we are facing some serious economic challenges, the New Zealand economy has weathered the economic storm created by pandemic and war relatively well. Inflation and unemployment are both low compared to the vast majority of OECD countries.” The release is backwards looking in nature, so fails to provide much in the way of meaningful insight into the future of monetary policy.
• A subsequent address by RBNZ Governor Orr went over old ground.
• Looking ahead, Friday’s domestic docket will see the release of food price data and the latest Business NZ manufacturing survey, although early price action is set to be dominated by post-U.S. CPI adjustments.