NZGBS: Cheaper With US Tsys After US CPI Beat

In local morning trade, NZGBs are 1bp cheaper after US tsys finished the NY session cheaper. After some initial volatility, higher-than-hoped-for CPI inflation data weighed on US tsys, with yields finishing 5-6bps higher across benchmarks. Projected rate cut pricing also receded as the CPI data was deemed unlikely to provide the FOMC with confidence that inflation will return to 2% in the near term.

• CPI m/m (0.4% vs. 0.4% est), y/y (3.2% vs. 3.1% est); CPI Ex Food and Energy m/m (0.4% vs. 0.3% est) y/y (3.8% vs. 3.7% est). Meanwhile, Real Avg Hourly Earning y/y (1.1% vs. prior 1.3% (rev)).
• (AFR) “We think the report will underscore Fed caution but not fundamentally challenge policymakers view that – subject to validation from March, April and May data – they will be cutting in June with a current expectation of three cuts total this year,” Evercore ISI’s Krishna Guha.
• The S&P 500 rose ~1% to a record closing high.
• Swap rates are flat to 1bp higher.
• RBNZ dated OIS pricing is slightly firmer across meetings. A cumulative 63bps of easing is priced by year-end.
• February Food Prices fall 0.6% m/m, +2.1% y/y.
• RBNZ Chief Economist Conway will speak at a Kiwibank even tomorrow.