NZGBS: Post-RBNZ Sell-Off Continued

NZGBs closed 6-8bps cheaper, with the short-end underperforming. The stronger-than-expected Q1 Retail Sales excluding Inflation likely contributed but the primary driver was yesterday's announcement from the RBNZ that it expects to maintain tight monetary policy for longer due to domestic inflation pressures. (See MNI RBNZ Review here)

• Additionally, lacklustre demand at today's weekly supply, with cover ratios for the three lines at or below 2.00x, further impacted the market.
• Comments from Federal Reserve officials in the May FOMC minutes, indicating that US interest rates will need to stay higher for longer to combat persistent inflation, also weighed on NZGBs.
• 2-, 5- and 10-year yields are a cumulative 15bps, 11bps and 10bps higher respectively than pre-RBNZ levels.
• Swap rates closed 3-8bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS has continued to firm with pricing being 7-13bps firmer for meetings beyond October. Additionally, these meetings are now 18-23bps firmer than before the RBNZ Decision.
• The local calendar will see ANZ Consumer Confidence and Trade Balance data tomorrow.
• Later today, the US calendar will release the Chicago Fed Nat Activity Index, Jobless Claims and S&P Global US PMIs.