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Little Changed, Limited Spillover From Heavy NZGBs Following RBNZ Decision

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ACGBs (YM flat & XM +1.0 are little changed after dealing in narrow ranges in today’s Asia-Pac session. With the local calendar empty apart from Jun-54 supply, local participants appear content to sit on the sidelines ahead of the release of the May FOMC Minutes later today.

  • Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest gains.
  • Cash ACGBs are flat, with the AU-US 10-year yield differential 3bps higher at -17bps.
  • This comes despite heavy post-RBNZ decision selling pressure for NZGBs. NZGBs are 5-9bps cheaper. The 0.2pp overshoot of the RBNZ’s Q1 CPI forecast seems to have driven a hawkish shift. Rates may now need to stay restrictive for “longer than anticipated”. The RBNZ’s upward revision to its OCR path and the discussion of another hike reflect this. It said “rate cuts continue to be delayed”.
  • The NZ OCR is now not expected to be materially below 5.5% until H2 2025. The decision to leave rates at 5.5% was unanimous.
  • Swap rates are also flat.
  • The bills strip is flat to -1.
  • RBA-dated OIS pricing is flat to 1bps firmer across meetings. A cumulative 9bps of easing is priced by year-end.
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ACGBs (YM flat & XM +1.0 are little changed after dealing in narrow ranges in today’s Asia-Pac session. With the local calendar empty apart from Jun-54 supply, local participants appear content to sit on the sidelines ahead of the release of the May FOMC Minutes later today.

  • Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest gains.
  • Cash ACGBs are flat, with the AU-US 10-year yield differential 3bps higher at -17bps.
  • This comes despite heavy post-RBNZ decision selling pressure for NZGBs. NZGBs are 5-9bps cheaper. The 0.2pp overshoot of the RBNZ’s Q1 CPI forecast seems to have driven a hawkish shift. Rates may now need to stay restrictive for “longer than anticipated”. The RBNZ’s upward revision to its OCR path and the discussion of another hike reflect this. It said “rate cuts continue to be delayed”.
  • The NZ OCR is now not expected to be materially below 5.5% until H2 2025. The decision to leave rates at 5.5% was unanimous.
  • Swap rates are also flat.
  • The bills strip is flat to -1.
  • RBA-dated OIS pricing is flat to 1bps firmer across meetings. A cumulative 9bps of easing is priced by year-end.