NZGBS: Cheaper But Off Worst Levels, Outperformance In $-Bloc Continued

NZGBs closed 1-5bps cheaper but near the best levels of the local session. With no significant domestic events until the release of trade balance data on Friday, it's probable that local participants have been closely following global bond market trends. This attention has been driven by the overnight uptick in US tsy yields to new cycle highs and the current surge in longer-dated JGBs to fresh cycle peaks.

• Nevertheless, NZGBs have managed to add to yesterday’s post-CPI-induced outperformance in the $-bloc. The NZ-US and NZ-AU 10-year yield differentials have narrowed another 4-6bps today, bringing the cumulative outperformance from pre-CPI levels to 8-9bps.
• Swap rates are flat to 3bps higher, with the 2s10s curve steeper and implied swap spreads tighter.
• RBNZ dated OIS pricing is flat to 3bps firmer across meetings, unwinding some of yesterday’s post-CPI softening. Nevertheless, pricing remains 5-7bps softer than pre-CPI levels. Terminal OCR expectations sit a 5.65% versus the pre-CPI level of 5.72%.
• Tomorrow, the NZ Treasury plans to sell NZ$200mn of the May-26 bond, NZ$200mn of the May-34 bond and NZ$100mn of the May-41 bond.
• Later today, the US calendar sees House Starts and the Fed’s Beige Book. There is also a number of Fed speakers.