NZGBS: Closed Cheaper & Near The Session’s Worst Levels, Q1 CPI Tomorrow

NZGBs closed 5-8bps cheaper and close to the session’s worst levels ahead of tomorrow’s Q1 CPI. Consensus expects headline CPI to rise 0.6% q/q after 0.5% in Q4 to be up 4.0% y/y down from 4.7% helped by base effects (Q1 2023 rose 1.2% q/q). Non-tradeable inflation is expected to remain elevated at 1.3% q/q though up from 1.1%, while tradeables should again fall by 0.2% q/q.

• In February, the RBNZ projected a 0.4% q/q rise in Q1 CPI with the annual rate easing to 3.8% y/y. This is at the lower end of consensus expectations, which are between 0.4% and 0.8% q/q and 3.7% and 4.2% y/y.
• (Bloomberg) -- Weak business confidence is helping to ease inflation pressures, the Treasury Dept says in its Fortnightly Economic Update published Tuesday. (See link)
• (Bloomberg) Labor Productivity fell 0.9% in the year ended March 2023, the largest fall since 2009, which followed a rise of 1 per cent in the year ended March 2022, according to the statistics department Stats NZ. (See link)
• Swap rates closed 5-8bps higher, with the 2s10s curve steeper and implied swap spreads wider.
• RBNZ dated OIS pricing is little changed. A cumulative 38bps of easing is priced by year-end.