NZGBS: Sharply Weaker With US Tsys Following Hotter Than Expected US CPI

In local morning trade, NZGBs are 12bps cheaper after US tsy yields shunted higher following hotter than expected CPI inflation data: m/m (0.4% vs. 0.3% est), y/y (3.5% vs. 3.4% est); CPI Ex Food and Energy m/m (0.4% vs. 0.3% est), y/y (3.8% vs. 3.7% est).

• US tsys were pressured further by a poorly received 10-year auction re-open tailed 3.3bp (largest since Dec'22: 4.560% high yield vs. 4.527% WI; bid-to-cover falls to 2.34x vs. 2.51x prior).
• There was little reaction to the March FOMC minutes where the majority favoured cutting QT pace by half "soon".
• US tsys bear-flattened, with the 2-year yield finishing 23bps higher at 4.97%. The US 10-year yield increased 18bps to 4.54%, a fresh YTD high, and more than 70bps above January levels.
• Swap rates are 12-13bps higher.
• RBNZ dated OIS pricing is 2-11bps firmer across meetings, with late-24/early-25 leading. A cumulative 48bps of easing is priced by year-end.
• NZ Trade Minister McClay is to visit China next week.
• Today’s local calendar sees Finance Minister Willis appear in front of a Select Committee on Budget Policy.
• The NZ Treasury plans to sell NZ$275mn of the 3.0% Apr-29 bond, NZ$175mn of the 2.0% May-32 bond and NZ$50mn of the 2.75% May-51 bond.