NZGBS: Pare Post-Budget Sell-Off, US Tsys Assist

NZGBs closed 2-5bp richer, paring the post-budget sell-off. Richer US tsys in Asia-Pac have assisted the move.

• Swap rates closed with rate 1-6bp lower with the 2s10s curve 5bp flatter.
• 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.
• RBNZ dated OIS closed 3-6bp softer across meetings with October leading. 33bp of tightening is priced for this week’s RBNZ meeting. Terminal rate expectations sit at 5.86%.
• NZ households expect CPI inflation to be 7.4% in a year’s time, according to the RBNZ’s 2Q household expectations survey. Expectations rise from 7% in 1Q, according to Bloomberg.
• The orderly fall in property prices over the past 18 months has reduced the risk of a significant rise in credit losses for New Zealand banks, S&P said in a statement.
• A Bloomberg article reports, a majority of nine members of the RBNZ Shadow Board recommend a 25bp increase in the OCR at the May 24 decision given domestic inflation pressures remain high and the upside risk to inflation due to the weather events, according to NZIER. (link)