NZGBS: Richer, FOMC Opens Door For June Pause

NZGBs opened 4bp richer following the strengthening in US tsys after the FOMC hiked 25bp to 5.0-5.25%, as widely anticipated. However, the FOMC's forward guidance signalled a possible pause at the next meeting on June 14, with the explicit tightening bias removed and replaced with a more tentative statement indicating that "additional policy firming may be appropriate," taking several factors into consideration. The risks to financial stability from regional banking issues were downplayed.

• Swap rates opened 5bp lower with implied swap spreads lower.
• RBNZ dated OIS opened 2-7bp softer with Apr’24 leading. 25bp of tightening is priced for the May meeting with terminal OCR expectations at 5.58%.
• Earlier this morning RBNZ's Hawkesby told a parliamentary panel that the underlying economy has strength and that there are no market concerns about NZ government debt.
• Building permits are slated for release with a post-Cyclone Gabrielle rebound expected. ANZ April Commodity Prices are also due for release today.
• In Australia, the March trade balance is scheduled with another significant surplus expected.
• The NZ Treasury plans to sell NZ$200mn of the 0.5% 15 May 2026 bond, NZ$150mn of the 2.00% 15 May 2032 bond and NZ$50mn of the 1.75% 15 May 2041 bond tomorrow.