Swap Spread Payside Activity Seemingly Aids NZGBs Cheapening

NZGBS cheapened on Monday, with the major benchmarks seeing yields move 4-5bp higher.

• This came after Friday’s weakness in UK Gilts & U.S. Tsys, with a relief bounce in the latter on the back of weekend news flow out of the UK which triggered hope re: the adoption of a more realistic fiscal footing in London doing little for NZGBs.
• Payside swap flows probably helped this dynamic, with swap spreads wider on the day, as outright 2-Year swaps registered fresh cycle highs above the 5.00% mark.
• Q3 CPI data headlines Tuesday’s docket, with moderations in headline readings expected (BBG median points to +6.6% Y/Y & +1.5% Q/Q vs. respective priors of +7.3% & +1.7%), although non-tradable inflation is expected to accelerate (BBG median of +1.8% Q/Q vs. the +1.4% seen in Q3). Such a dynamic would justify continued tightening from the RBNZ with domestic inflationary pressures remaining evident, while headline inflation is set to remain comfortably above the RBNZ’s 1-3% target band.
• RBNZ dated OIS shows terminal OCR pricing just above 5.00%.
• Non-resident bond holding data for Sep is also due.
• Elsewhere, any trans-Tasman impulse from the minutes covering the most recent RBA monetary policy decision and an address from RBA Deputy Governor Bullock will be eyed.