NZGBS: Closed Slightly Cheaper After A Post-Employment Data Rally

NZGBs closed flat to 2bps cheaper after today’s Q1 Employment Report printed weaker than expected. The local market had been as much as 5bps cheaper early after a negative lead-in from US tsys.

• Q1 employment fell 0.2% q/q to be up only 1.2% y/y after rising 0.4% and 2.7% in Q4 respectively. The unemployment rate rose 0.3pp to 4.3%, its highest since Q4 2018. The labour market is softening as demand weakens and labour supply strengthens, which was also reflected in moderating wage growth.
• The labour cost index rose 0.9% to be up 4.1% y/y, the lowest quarterly rate since Q1 2022. It remains elevated though and only 0.2pp lower than its 4.3% peak.
• The progress should reassure the RBNZ but is unlikely to shift the MPC to an easing bias at its May 22 meeting.
• Swap rates closed -1bp to +2bp., with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed 2-4bps softer for meetings beyond August. A cumulative 37bps of easing is priced by year-end.
• RBNZ officials will appear in parliament to discuss the Financial Stability Report tomorrow. Building Permits for March are also due.
• Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 4.5% May-30 bond and NZ$250mn of the 3.5% Apr-33 bond.