NZGBS: Richer After Q1 Employment Report Miss

In local morning trade, NZGBs sit flat to 2bps richer on the day but 4-6bps richer after the Q1 Employment Report prints weaker than expected. The Unemployment Rate rises to 4.3% (4.2% est) from 4.0%, while the Employment Change shows -0.2% q/q (+1.2% y/y) versus expectations of +0.3% and +1.6% and +0.4% and a revised +2.7% prior.

• Wage outcomes were in line with expectations at +0.8% (prior 1.0%).
• Overnight US tsys and US equities were pressured again by stronger-than-expected inflation data and tumbled into the FOMC meeting Wednesday as the data further pushed back against rate cuts.
• The 2-year yield rose 6bps to close at 5.04%, breaking the 5% level on a closing basis for the first time since November 13.
• The employment cost index (ECI), which is closely monitored by the Federal Reserve, rose by 1.2% in Q1 versus +0.9% est.
• Broader macro considerations will have to wait until Thursday's Q1 preliminary release for productivity. Strong productivity gains have offset labor costs in recent quarters but consensus sees productivity growth tailing off to 0.7% annualized in Q1.
• Swap rates are 3-5bps
• RBNZ dated OIS pricing is little changed so far. A cumulative 32bps of easing is priced by year-end.