NZGBS: Closed Cheaper, US Tsys Weaken Ahead Of Chair Powell's Address

NZGBs closed 2bp cheaper, but well off session bests set in early local session trading. The limited local calendar activity suggests that the upward movement from yield lows can largely be attributed to softer US tsy yields in Asia-Pac trading. However, the range for cash tsys has been relatively narrow given the absence of significant macroeconomic news flow.

• The NZ/US 10-year yield differential has widened by 8bp, currently standing at +74bp. In addition, NZGBs have shown weaker performance compared to ACGBs, with the NZ/AU 10-year yield differential increasing by 7bp to +50bp, after reaching a five-week low yesterday.
• The 2s10s swap curve twist flattened with rates +3bp to flat.
• RBNZ dated OIS pricing closed 1-3bp firmer across meetings with terminal OCR expectations at 5.60%.
• The local calendar is slated to release May trade balance data tomorrow. The underlying balance is slowly improving as imports soften.
• Before then, the focus turns to Fed Chairman Powell's semi-annual testimony to the House Services Panel later today, though it's unlikely Chair Powell will deviate from last week's policy messaging.
• The NZ Treasury announced that they plan to sell NZ$200mn of the 4.50% 15 May 2030 bond, NZ$150mn of the 3.50% 14 April 2033 bond and NZ$50mn of the 2.75% 15 April 2037 bond tomorrow.