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NZGBS: Closed Richer & At Session Highs, Few Surprises From The RBNZ

BONDS

NZGBs closed at the session’s best levels, 6-8bps richer, after the RBNZ's April monetary policy decision delivered few surprises. As expected, the decision was to hold rates steady at 5.50%.

  • RBNZ board members acknowledged that most major central banks are “cautious” about easing policy given the risk of inflation remains sticky.
  • The RBNZ noted that growth in unit labour costs remains elevated. Inflation will continue to be persistent in regions where higher labour costs have not been accompanied by improved productivity or reduced profit margins.
  • The central bank also noted: "Overall, members agreed that the balance of risks was little changed since the February Statement."
  • Cash US tsys have slightly extended yesterday’s richening in today’s Asia-Pac session ahead of US CPI data and the release of the FOMC Minutes.
  • Swap rates are 4-8bps lower, with the 2s10s curve flatter.
  • RBNZ dated OIS pricing is flat to 2bps firmer after the decision, with 60bps of cumulative easing priced for year-end.
  • Tomorrow, the local calendar sees Finance Minister Willis in front of a Select Committee on Budget Policy.
  • Tomorrow, the NZ Treasury plans to sell NZ$275mn of the 3.0% Apr-29 bond, NZ$175mn of the 2.0% May-32 bond and NZ$50mn of the 2.75% May-51 bond.

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