NZGBS: Richer, Off Bests, Pressured By US Tsys & ACGBs

NZGBs closed flat to 1bp cheaper, well off the local session’s best levels despite NZ trade data adding to signs the economy may have been in a recession. The economy shrank 0.6% q/q in the final three months of 2022.

• Import volumes jumped 6.7% q/q, the most in two years in Q1, while export shipments increased just 1% q/q. However, construction work, another input in Q1 GDP calculations, rose 0.6% q/q (estimate -2.0%) in 1Q.
• The decline in NZGBs during the session seemed to be driven by the overall weakness in bonds during Asia-Pac trading. This weakness was particularly evident in ACGBs, which were influenced by economists adopting a more hawkish stance ahead of the RBA decision next Tuesday. Additionally, the announcement of a minimum wage increase of 5.75% by the Australian Fair Work Commission also contributed to the bond market reaction.
• NZ/US 10-year yield differential closes +6bp at +71bp, with the NZ/AU differential unchanged at +68bp.
• Swap rates closed flat with the 2s10s unchanged.
• RBNZ dated OIS closed little changed.
• The local calendar is light next week with ANZ Commodity Prices (Tue) and Mfg Activity (Wed) as the only releases. The NZ Government is also scheduled to release its 10-month Financial Statement on Wednesday.