NZGBS: Closed On A Weak Note, Yields Pressured By GDP, Supply & US Tsys

NZGBs closed near session cheaps, with benchmark yields 5bps higher. Domestic and offshore factors were at play.

• On the home front, the NZ economy exited its technical recession, with Q1 GDP printing +0.2% q/q (+0.3% y/y) versus consensus expectations of +0.1% (+0.2%).
• The RBNZ forecast +0.2% q/q in its May Monetary Policy Statement. Accordingly, the result is unlikely to change the MPC’s wait-and-see stance.
• NZGBs extend losses after lacklustre weekly bond auctions. May-31 supply saw a cover ratio of 1.24x, down from 2.46x at the prior outing. The ratio for the May-34 bond fell to 1.85x from 2.60x prior.
• Cheaper cash US tsys, yields 2-3bps higher, in today’s Asia-Pac session after yesterday’s holiday was also a drag on the local market.
• Swap rates closed 4-6bps higher.
• RBNZ dated OIS pricing closed 3bps firmer for 2025 meetings. A cumulative 30bps of easing is priced by year-end.
• Tomorrow, the local calendar is empty.
• Today, the US calendar will see Weekly Claims, House Starts and Building Permits. The Bank of England will also make their policy announcement, with an on-hold decision likely.