NZGBS: Richer, Solid Takedown of Weekly Supply

NZGBs closed 3-4bp richer, well off session cheaps, as this week’s NZ$400 supply shows solid demand, particularly for the May-51 bond (cover ratio of 4.42x). The cash lines in the auction were 3-5bp lower in post-auction trading.

• In contrast to cash NZGBs, swap rates closed flat to 3bp lower with 10-year outpeforming.
• RBNZ dated OIS closed 1-5bp softer across meetings with 23bp of tightening priced for the upcoming May 24 meeting.
• REINZ House Price Index falls 12% y/y but showed some tentative signs of stabilisation.
• April Food Prices printed a relatively small increase of 0.5% m/m in April but the annual rate accelerated to +12.5% from 12.1%. The monthly increase was pulled lower by a 2.9% m/m decline in fruit and vegetable prices.
• Tomorrow sees the local calendar release April's Manufacturing PMI and March's Net Migration with the former likely to remain weak and the latter continuing to show post-border opening strength.
• The highlight however is likely to be the RBNZ’s Q2 Inflation Expectations. A lower-than-expected reading in Q1 saw RBNZ dated OIS scale back terminal OCR expectations.
• The global calendar delivers the BoE Rate Decision ahead of April’s US PPI data.