NZGBS: Cheaper With US Tsys, US Ratings Downgrade Concerns Weigh

NZGBs opened 4-5bp weaker as US tsy yields surge, reacting to negative ratings watch the news from agencies Fitch and DBRS Morningstar if the US defaults on their debt obligations. House speaker McCarthy was quick to respond with optimism that a deal can be struck. After the bell, the 2-year rate was up 16bp with the 10-year up 8bp.

• US GDP was revised up slightly in Q1 to an annualised 1.3%. The core PCE deflator was revised higher by 0.1% to a 5.0% annual rate in Q1.
• Swap rates opened 3bp higher.
• RBNZ dated OIS opened little changed across meetings with an expected terminal rate of 5.66%.
• ANZ has announced that they expect the RBNZ to raise the OCR by 25bp to 5.75% in November.
• ANZ’s consumer confidence survey is due this morning. Confidence should persist at a low level given the pressures on households from the ongoing impact of high inflation and rising mortgage payments.
• Following a review of the feedback from banks, the RBNZ has decided to proceed with easing loan-to-value ratio restrictions. From June 1 there will be a 15% limit for loans with LVR above 80% for owner-occupiers and a 5% limit for loans with LVR above 65% for investors.