NZGBS: Sharply Richer, At Bests After CPI Miss

NZGBs closed at session bests with benchmark yields 7-9bp lower as Q1 CPI surprised on the downside. The 2/10 cash curve steepened 2bp after the data.

• Overall demand for today's supply was good, with cover ratios ranging from 3.02x to 4.27x, consistent with last week's auction. However, the bid for the May-26 bond fell short of the robust demand (cover ratio of 6.25x) seen at the April 6th auction when the bond was last offered. Short-term bonds were in particularly high demand in early April, possibly reflecting concerns over potential over-tightening by the RBNZ, which unexpectedly raised interest rates by 50bp the day before. Today’s CPI data may allay some of those concerns.
• Swap rates are 7-9bp richer.
• RBNZ dated OIS closed flat to 7bp softer across meetings with 22bp of tightening priced for the May meeting versus 24bp pre-data. Easing expectations for Feb-24, off the expected terminal OCR of 5.56% (July), are currently 42bp.
• With the Antipodean calendar light for the rest of the week, the local market will likely be guided by US Tsys as they navigate US earnings season, Fedspeak and a raft of second-tier data releases. US jobless claims and April Philly Fed Index are today’s highlights.