NZGBS: Cheaper Despite Q1 CPI Printing In Line With Expectations, Some Initial Confusion

In local morning trade, NZGBs are 5bps cheaper after Q1 CPI printed on expectations at +4.0% y/y. Initial Newswire reports had suggested a miss at +3.7%. Tradables and Non-Tradables printed respectively +1.6% y/y and +5.8% y/y. (See Stas NZ release here)

• "Housing and household utilities was the largest contributor to the annual inflation rate. This was due to rising prices for rent, construction of new houses, and rates."
• “Rent prices are increasing at the highest rate since the series was introduced in September 1999.”
• "Non-tradeable inflation was 5.8 per cent in the 12 months to the March 2024 quarter (compared with 5.9 per cent in the 12 months to the December 2023 quarter), driven by rent, construction of new houses, and cigarettes and tobacco."
• Ahead of the release, NZGBs were 2bps cheaper following another heavy session for US tsys. The catalyst this time was Fed Chair Powell’s "lack of further progress on inflation" comment as he participated in a moderated chat with BoC head Macklem in the NY afternoon.
• Swap rates are 3-4bps higher after the data and 6-7bps higher on the day. The 2s10s curve is steeper on the day.
• RBNZ dated OIS pricing is 2-7bps firmer after the data, with early Apr-25 leading. A cumulative 34bps of easing is priced by year-end versus 38bps before the data.