NZGBS: Holding The Post-Budget Repricing

NZGBs opened 1bp weaker as US tsys traded cheaper before the weekend. Optimism about a debt ceiling deal was dampened when GOP negotiators walked out of talks, causing a risk-off decline in US tsy yields. Yields had pushed to their highest levels since mid-March in early NY trade, continuing the trend from last week. Debt ceiling talks overshadowed comments by Fed Chair Powell, suggesting a potential pause at the upcoming June FOMC meeting.

• NZGBs underwent a substantial repricing last week on the back of a more stimulatory than expected budget with the NZGB 2-year benchmark yield currently sitting 29bp higher with the 10-year yield 17bp higher.
• RBNZ dated OIS also shunted firmer post-budget to be 9-25bp higher across meetings with early ’24 leading. 37bp of tightening is priced for this week’s RBNZ meeting. Terminal rate expectations lifted to a new cycle high of 5.92%.
• Swap rates opened 1bp higher.
• The local calendar is light until Wednesday’s release of Retail Sales Ex-Inflation ahead of the RBNZ policy decision on the same day. BBG consensus expects a 25bp hike to 5.50%, although ASB expects a 50bp hike.
• Elsewhere, the PBOC Policy Decision is slated for today.