NZGBS: Richer, Quiet Overnight, Building Permits Due

NZGBs started the session on a positive note, opening 5bp higher, with the 2/10 curve 1bp steeper. Global markets were relatively quiet overnight as both the US and the UK observed public holidays.

• The recently reached tentative agreement to raise the US debt ceiling and prevent a government debt default will now face scrutiny as voting is expected to commence from Wednesday.
• Swap rates are 2bp lower with implied swap spreads wider.
• RBNZ dated OIS pricing is little changed across meetings.
• The RBNZ is expected to keep its official cash rate at 5.50% through the end of 2023, according to a Bloomberg survey conducted from May 25-26. The first rate cut of 25bp is projected during the first quarter of next year. (link)
• The local calendar sees April Building Permits slated for release today. The number of new dwelling consents rose 7% in March, driven by a large rise in multi-unit consent numbers. A reversal of this strength is expected. In a broader context, the past year has witnessed a significant surge in borrowing expenses, declines in housing prices, and substantial increases in construction costs. As a result of the decreased demand, developers are launching fewer new projects in the market.