NZGBS: Post-RBNZ Sell-Off Continues, Higher Than Expected Q1 Real Retail Sales

In local morning trade, NZGBs are 7-8bps cheaper as the post-RBNZ Decision sell-off extends into a second day following stronger-than-expected Q1 Retail Sales Ex. Inflation (+0.5% q/q vs. -0.3% est).

• RBNZ Governor Orr has also appeared in front of a parliament select committee with the central bank expecting to keep monetary policy tight for longer due to domestic inflation pressures.
• 2- and 10-year yields are a cumulative 15bps and 10bps higher respectively than pre-announcement levels.
• Overnight, there was no major reaction from US tsys to the May 1 FOMC minutes. “Participants noted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum, and assessed that it would take longer than previously anticipated for them to gain greater confidence that inflation was moving sustainably toward 2%,” the minutes said. Some officials also appeared willing to contemplate interest rate increases if conditions appear to worsen.
• Swap rates are 7-11bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is 4-9bps firmer for meetings beyond August. A cumulative 26bps of easing is priced by year-end.
• Today, the NZ Treasury plans to sell NZ$250mn of the 3% Apr-29 bond, NZ$175mn of the 2% May-32 bond and NZ$75mn of the 1.75% May-41 bond.