NZGBS: Closed At Cheaps Despite Solid Supply Takedown

NZGBs ended the day 2bp cheaper after an initial strengthening during the local session. Despite a successful takedown of the weekly supply of the May-28 and May-34 bonds, the prices of NZGBs declined throughout the session. The cover ratios for the May-28 and May-34 bonds improved to 3.55x and 3.34x, respectively, compared to 2.47x and 3.31x previously. However, the cover ratio for the May-51 bond slightly decreased to 2.92 from 3.92.

• The session's weakness seems to be primarily influenced by the softness in US tsys during Asia-Pac trade and the sell-off of ACGBs following the release of stronger than expected retail sales data, notwithstanding the recent rise in business confidence and activity reported in the ANZBO survey.
• Swap rates closed 1-3bp higher with the 2s10s curve flatter.
• RBNZ dated OIS pricing flat to -3bp softer across meetings.
• Business confidence rose to -18 in June from -31.1. Business confidence is at its highest since November 2021. While the levels of many activity indicators are still subdued, firms appear to be cautiously optimistic that the worst may be over (ANZ).
• The local calendar tomorrow sees Consumer Sentiment, with the data expected to continue to signal ongoing recessionary conditions, as households deal with the headwinds of high inflation and interest rates.