NZGBS: Twist Flattened After Strong Employment Data

NZGBs closed with the cash 2/10 curve twist flattening with the 2-year benchmark ending 5bp weaker, at the session’s cheap, and the 10-year 2bp richer. The local market opened grappling with the dual influences of post-RBA weakness in ACGBs and overnight strength in US tsys following softer data and US regional banks concerns. The local market was initially richer but weakened following the release of strong employment data.

• Q1 labour market data showed that the labour market remained very tight. Employment rose a stronger than expected 0.8% Q/Q to be +2.4% Y/Y after +0.5% and 1.6% in Q4. Unemployment held steady at a 3.4% rate versus expectations of 3.5%. Private sector wages undershot expectations of +1.1% Q/Q with a print of +0.9%.
• Swap rates closed 3bp higher to 4bp lower with the 2s10s curve twist flattening and implied swap spreads narrower.
• RBNZ dated OIS closed 4-7bp firmer across meetings.
• Building consents are slated for release tomorrow.
• All eyes will now turn to the FOMC decision later today with BBG consensus expecting a 25bp increase to 5.25%.
• The NZ Treasury announced that they plan to sell NZ$200mn of the May-26 bond, NZ$150mn of the May-32 bond and NZ$50mn of the May-41 bond tomorrow.