NZGBs Off Lows As Swaps Reverse & Longer Dated NZGB Supply Is Well Received

NZGBs peeled away from session cheaps on Thursday, after initially cheapening on spill over from Wednesday’s U.S. Tsy trade and concession into weekly NZGB supply.

• The weekly NZGB auctions (covering NZGB May-28, Apr-33 & May-51) saw firm demand for the two longer bonds, with cover ratios of 4.41x & 3.44x, respectively, while the shortest bond on offer saw more muted demand, registering a cover ratio of 1.20x, with worries re: more aggressive RBNZ tightening probably limiting demand there.
• Benchmark NZGBs, finished 2.5-9.0bp cheaper on the day, with bear flattening in play.
• Swaps fully reversed their early push higher into the bell, resulting in swap spread tightening across the curve.
• This came alongside a pullback in terminal RBNZ OCR pricing in the dated OIS strip, which moved from as high as ~5.50% at one point, back to just below 5.40% into the close.
• Looking ahead, Friday will see the release of the monthly NZ trade balance data.