NZGBS: Twist Steepen Ahead of NZGB Supply Tomorrow

NZGB cash curve twist steepens, with the 2-year benchmark 1bp richer and the 10-year benchmark 4bp cheaper at the close. This movement was linked to the weekly supply announcement from the NZ Treasury. Implied long-end swap spread narrowed with swap rates 1-2bp lower at the close.

• The NZ Treasury plans to sell NZ$200mn of the May-28 bond, NZ$150mn of the Apr-33 bond and NZ$50mn of the May-51 bond tomorrow.
• The NZGB auctions on April 6th also resulted in a steepening of the curve, with stronger demand seen for short-end supply, likely due to concerns of over-tightening by the RBNZ.
• Today's price action may also have been influenced by RBNZ's recent decision statement, which expressed concerns about the inflation risks associated with fiscal spending financed through borrowing, as opposed to re-prioritisation or spending deferrals.
• RBNZ dated OIS pricing is flat to 4bp firmer across meetings with 20bp of tightening priced for May.
• With Total Card Spending in March (+3.1% M/M, 16.1% Y/Y) suggesting very little deceleration in retail sales values in Q1, the RBNZ is unlikely to find any comfort in today’s data.
• The market’s focus now shifts to the release of US CPI and FOMC Minutes later today.