Tight Day Despite Busy Local Docket

NZGBS: A very sedate round of NZGB trade on Wednesday, with the major benchmarks hugging tight ranges, closing at virtually unchanged levels across the curve.

• The HYEFU came and went, with the Treasury still looking for the attainment of an OBEGAL surplus in FY24/25, even with NZGB issuance requirements over 4 years rising by a cumulative NZ$18bn, alongside a mark down in GDP expectations and forecasts of a mild recession combined with a “contractionary” fiscal policy stance. The Treasury did stress that this policy stance will aid the RBNZ’s battle against inflation.
• Ultimately, the lack of deferral when it came to the Treasury’s forecast timeline in reaching an OBEGAL surplus, the proximity to the impending FOMC decision and any lingering impact from the softer than expected U.S. CPI release seemed to counter any worry re: the uptick in NZGB issuance.
• Moves in swaps were a little more pronounced to start, but soon unwound, with the major swap rates finishing the day little changed, outside of 2s (with BBG pointing to a ~6bp move lower there, although we aren’t convinced that is completely accurate).
• RBNZ rhetoric from Governor Orr & Deputy Governor Orr provided familiar tones, reiterating that there is more work do in the fight against inflation.
• RBNZ dated OIS was little changed on the day come the close, with ~68bp of tightening priced for the Feb ‘23 meeting and a terminal OCR of 5.45% seen.
• Q3 GDP data and the weekly round of NZDM supply headline locally on Thursday.