NZGBS: Continue To Outperform in the $-Bloc

NZGBs closed 3-4bp cheaper after trading in a relatively narrow range. Without domestic drivers, local participants appear to have been happy to sit on the sidelines ahead of April US PCE deflator data later today. BBG consensus expects the core PCE deflator to print 0.3% m/m 4.6% y/y unchanged from March.

• NZGBs have continued their outperformance in the $-Bloc since the RBZ decision with NZ/US and NZ/AU 10-year yield differentials 3bp and 2bp respectively lower.
• Swap rates are 2-4bp higher with the implied long-end swap spread wider.
• RBNZ dated OIS closed with pricing 1-4bp firmer for meetings beyond August.
• RBNZ Silk said the impact of cyclone Gabrielle has been less inflationary than first feared. The Reserve Bank had initially estimated that Cyclone Gabrielle would add 0.3ppt to inflation in both the first and second quarters but has since downgraded that impact to just 0.1ppt. (link)
• ANZ consumer confidence index fell to 79.2 in May from 79.3 in April. Inflation expectations eased to 4.8% from 5.2%.
• The local calendar next week sees Building Permits (Apr) on Monday, ANZ Business Confidence (May) and CoreLogic House Prices (May) on Wednesday and Terms of Trade (Q1) on Friday.