NZGBS: Slightly Weaker Ahead of Q1 CPI Data

NZGBs opened 1bp weaker ahead of the Q1 CPI release today. Meanwhile, US Tsys closed modestly weaker following the release of the Federal Reserve's Beige Book, which did not appear to have any significant impact on the market.

• The NZ Treasury plans to sell today NZ$200mn of the May-26 bond, NZ$150mn of the May-34 bond and NZ$50mn of the May-41 bond.
• Given that today's auction will feature the same bond composition as April 6, market participants will be keeping a close eye on whether the May-26 bond will attract a similarly robust bid (cover ratio of 6.25x). It is worth noting that at the April 6th auction, demand for short-term bonds was particularly strong, which could be attributed to concerns over potential over-tightening by the RBNZ, which had unexpectedly raised interest rates by 50bp the day before.
• Swap rates are 2-3bp higher, implying wider swap spreads.
• RBNZ dated OIS opened 1-3bp firmer across meetings. 24bp of tightening is priced for the May meeting.
• Q1 CPI is slated for release at 2345 BST. While it is expected to moderate it is likely to remain elevated driven by higher food and construction prices related to earlier severe weather. BBG consensus is expecting a print of +1.5% Q/Q and 6.9% Y/Y.