NZGBs Off Worst Levels But Comfortably Cheaper On Broader Impetus

NZGBs held on to the bulk of their early cheapening (derived from wider core FI moves on Wednesday), running 10-12bp cheaper across the major benchmarks at the close, with light bear flattening seen.

• A brief round of support in the U.S. Tsy space helped NZGBs off of session cheaps,
• Today’s weekly NZGB supply passed smoothly enough (cover ratios on the May-28, Apr-33 and May-51 auctions all printed above 2.50%, aided by the move away from recent outright cheaps), with yields pulling further away from session highs post-auction.
• Comments from NZ Finance Minister Robertson failed to move the needle, as he pointed to NZ’s ability to avoid a recession (despite clear challenges), a focus on boosting worker availability via improving Visa processing , while underscoring the responsible fiscal approach that NZ has undertaken, sticking with previous forecasts re: a return to budget surplus (with any quickening of that timeline requiring austerity).
• Robertson also played down any sense of long-term worry re: the NZD, while noting that debt usage should be geared towards financing longer term projects (with some focus on productivity), stressing that he is comfortable with borrowing costs.
• A modest uptick in RBNZ terminal rate pricing has come alongside the move higher in yields, with dated OIS pricing a peak rate of 4.65%.