NZGBS: Cheaper But Outperforms ACGBs

NZGBs closed on a low note with the benchmarks 11-13bp cheaper and the 2/10 cash curve steeper. Weekly supply sees solid demand (cover ratio above 3.00x) for the Apr-33 and Apr-37 bonds, but a somewhat weaker bid for the May-30 bond (cover ratio at 2.64x). The lines richened around 0.5bp post-auction in line with the broader market.

• NZGBs have shown stronger performance compared to ACGBs, with the NZ/AU 10-year yield differential -4bp. At +59bp, the NZ/AU differential is back near its tightest level since mid-February. The 10-year differential hit a 20-year+ high in March at around +100bp.
• Swap rates closed 11-14bp higher with the 2s10s curve 3bp steeper.
• RBNZ dated OIS pricing closed 6-10bp firmer for meetings beyond October with May’24 leading. Terminal rate expectations sit at 5.64% (October).
• Q1 manufacturing volumes fell 2.1% q/q after -4.6% in Q4. Statistics NZ said that the data has been impacted by recent severe weather events but that it is difficult to isolate that from other special factors. Q1 GDP is published on June 15.
• The local calendar is light tomorrow with Retail Card Spending for May slated for Monday. The highlight of next week, however, will be Q1 GDP on Thursday.