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

BONDS

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.
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