NZGBS: Closed At Cheaps, ACGBs Weaker After RBA Minutes

NZGBs closed at session cheaps with yields 14-15bp higher. A weaker lead from US Tsys saw NZGB yields open higher, but some early Asia-Pac strength in US Tsys helped to contain the early session cheapening. When ACGBs weakened after the RBA Minutes for April made a special point that “monetary policy may need to be tightened at subsequent meetings”, the local market weakened in sympathy. Stronger than expected China Q1 GDP also supported the move.

• At the close, the NZ/US and NZ/AU 10-year yield differentials were respectively 6bp and 3bp wider.
• Swap rates closed 9-10bp weaker with implied swap spreads 5bp tighter.
• RBNZ dated OIS closed 2-8bp firmer across meetings.
• REINZ house prices rose (1.4% M/M) for the first time in 18 months giving some hope that the retreat may have bottomed out.
• The local calendar is light ahead of Q1 CPI on Thursday. With the release yesterday of the final pieces in the CPI forecasting puzzle (March food and rental price data) BBG consensus is expecting a print of +1.5% Q/Q and 6.9% Y/Y after +1.4% and 7.2% in Q4.
• Until then, the local market will remain guided by US Tsys which have cheapened for three consecutive sessions.