NZGBS: Little Changed, Q1 CAD Lowe Than Expected, Q1 GDP Tomorrow

In local morning trade, NZGBs are dealing little changed after the Q1 Current Account Deficit showed NZ$4.359bn versus expectations of NZ$4.650bn. The deficit was 6.8% of GDP in 12 months to March versus 6.9% prior.

• Overnight, a weaker-than-expected US retail sales report and a strong 20Y bond auction supported US tsys, with the 10-year yield finishing 6bps lower at 4.22%.
• US retail sales for May printed weaker than expected, with a rise of just 0.1% for the headline and ex-auto and gas measures. There were also downward revisions to March and April.
• Tuesday’s rally in US tsys came despite some Fed speakers pushing back on dovish expectations: Boston Fed Collins: "shouldn't overreact to a month or two of good inflation data"; StL Fed Musalem "could be 'quarters' before the first rate cut".
• Swap rates are 1-2bps lower on the day, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is little changed. A cumulative 29bps of easing is priced by year-end.
• The local calendar will see Q1 GDP tomorrow.
• Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 1.5% May-31 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 5.0% May-54 bond.