NZGBS: Slightly Stronger, US Tsys Supported by PPI and Jobless Claims

NZGBs opened 2-3bp richer after US tsys firmed following another lift in initial jobless claims, confirming the labour market is starting to cool. US PPI data was largely consistent with expectations, supporting yesterday's CPI data and indicating that inflationary pressures are subsiding. After the NY bell US tsy yields out to the 10-year were 1-6bp lower with the curve flatter.

• Swap rates opened 2bp lower.
• RBNZ dated OIS opened little changed with 23bp of tightening priced for the May 24 meeting.
• NZ Finance Minister Robertson in a pre-budget speech said the budget, released May 18, will invest in infrastructure to build resilience in the face of increased weather risks. He also stated that “Now is not the time to be putting that resilience at risk by undermining the Government’s fiscal position with unfunded inflationary tax cuts”.
• Today sees the release of 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 release of Q2 RBNZ’s 2-Year Inflation Expectations. A dip is expected in line with a cooling in headline inflation. A lower-than-expected reading in Q1 saw RBNZ dated OIS scale back terminal OCR expectations.