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Cheaper, Curve Flattens, NZ FinMin Delivers Pre-Budget Speech

BONDS

In local morning trading, NZGBs are 3-5bps cheaper, with the curve twist-flattening. Earlier NZ FinMin Nicola Willis delivered her pre-budget speech where see said the current economic situation is “challenging for the government books”.

  • US Treasury futures closed the session near lows, little reaction to in-line Wholesale Inventories data of -0.4% while MoM Wholesale Trade Sales comes out at -1.3%, much weaker than an estimated - 0.8% (2.3% prior down-revised to 2.0%).
  • The NZGB curve has twist-flattened, pivoting at the 7yr, the 2Y is +4.1bps at 4.769%, 10Y is +3.9bps at 4.691%.
  • Swap rates are about 1bps higher across the curve
  • RBNZ dated OIS is little changed this morning, with a cumulative 40bps of easing is priced by year-end
  • Earlier, FinMin Willis addressed the economic challenges ahead in her pre-budget speech, emphasizing the need for fiscal responsibility and modest spending, mentioning the economic situation is “challenging for the government books”. She mentioned that budget wouldn't be big-spending, but that it would deliver tax relief for middle and lower-income workers. The budget will be delivered May 30th.
  • Looking Ahead: NZ to Sell 7yr, 10yr 20yr at 12.35pm AEST and BusinessNZ Manufacturing PMI on Friday
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