NZGBS: Richening Creeps In Wake Of Well-Received Supply

NZGBs added to yesterday’s richening, running 3-5bp firmer across the curve, with yesterday’s bull steepening move extending.

• Today’s local docket was headlined by the weekly NZGB auctions, covering NZGB-27, -33 & -51. Cover ratios of 1.4-4.8x were observed across the 3 lines, with the Apr-27 line seeing the strongest cover. The smooth to strong reception of the supply allowed NZGBs to richen after a muted start.
• Swap rates were 5-6bp lower, leaving swap spreads flat to wider. 2-Year swaps hit a fresh YtD low, pulling further below 5.00%.
• The major RBNZ dated OIS staging posts moved back to yesterday’s post-CPI lows, with just under 60bp of tightening priced for next month’s meeting, alongside pricing of a terminal OCR of ~5.30%.
• Local headline flow has seen the YtD budget deficit print a touch narrower than expected, but that didn’t move the needle for the space.
• Elsewhere, comments from new PM Hipkins stressed that labour shortages are the top issue facing businesses at present, not ruling out further moves in immigration policy.
• The observance of a national holiday in Australia limited regional liquidity on Thursday, while the ongoing LNY holiday in China continues to remove a macro focal point from the broader Asia-Pac region.
• Looking ahead, the monthly ANZ business survey headlines the domestic docket ahead of the weekend.
• A reminder that Auckland is closed for a regional holiday on Monday, which will limit liquidity in NZ markets.