NZGBS: Richer, Closed Near Best Levels, NZ-AU 10Y Spread Narrows

NZGBs closed just off session bests with benchmarks 2-5bps richer and the 2/10 curve flatter.

• A better-than-expected Current Balance likely helped at the margin, but the outperformance relative to its antipodean counterpart appeared more driven by a post-RBA cheapening in ACGBs. The NZ-AU 10-year yield differential is 7bps tighter on the day.
• The RBA Governor’s press conference remark that a rate cut was not considered, but a hike was, caught the market by surprise. This seems inconsistent with the previous statement that the RBA was "not ruling anything in or out."
• The RBNZ's Conway expects inflation to continue to slow but said it needs more time to be certain. “These processes could occur more quickly or slowly than currently projected,” he said. “Overall, a period of restrictive policy is necessary to give us confidence that inflation will return to target over a reasonable timeframe.” (See BBG link)
• Swap rates closed 4-5bps lower.
• RBNZ dated OIS pricing closed 5bps softer for 2025 meetings. A cumulative 32bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Q1 GDP.
• Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 1.5% May-31 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 5.0% May-54 bond.