NZGBS: Richer On The Day, Outperforms ACGBs, US Holiday

NZGBs closed 5-6bp richer after opening slightly cheaper following the weaker lead-in from US tsys trading ahead of the weekend. With the market reaction to the increase in the BusinessNZ PSI limited, the strengthening over the local session appears to have been aided by a slight richening in both US tsy futures (cash tsys are closed for the Juneteenth holiday) and ACGBs in Asia-Pac trading. Nonetheless, NZGBs outperformed with the NZ/AU 10-year yield differential 5bp narrower at 43bp.

• Swap rates closed 1-4bp lower with the 2s10s curve flatter and implied swap spreads 3-4bp wider.
• RBNZ dated OIS closed little changed with terminal OCR expectations at 5.61%.
• NZ services expanded last month, according to the Performance of Services Index compiled by the Bank of New Zealand Ltd. and Business NZ. The May PSI jumped 3.2pts to 53.3 after declining to its lowest level this year in April.
• NZGBs held by international investors, as reported by the RBNZ, rose from 62.1% to 63.2% in May, the highest level since 2016.
• The local calendar is slated to release Q2 Westpac Consumer Confidence tomorrow ahead of May Trade Balance data on Thursday.