NZGBS: Very Strong Into The Close, Expected Terminal OCR At 5.55%

NZGBs closed on a very strong note, with yields 11-25bps lower across benchmarks. The move reflected the very strong lead-in from the NY session, with US tsys 14-21bps richer. That move has extended in today’s Asia-Pac session, with yields flat to 3bps lower across benchmarks as local participants digested Fed Chair Powell’s remark that the Fed had come “very far” with the rate hiking cycle.

• Strong demand metrics at today’s weekly bond auctions for the May-30 and May-34 bonds likely assisted today’s move. Cover ratios were 4.65x and 3.96x, respectively. However, the May-51 bond saw subdued demand, with a cover of 2.35x.
• The 10-year JGB has seen its yield rise since the NZ market close, primarily due to underwhelming demand metrics observed at today's 10-year auction. Depending on the developments during the remaining part of the JGB trading session, the local market may react at tomorrow’s opening.
• Swap rates closed 12-20bps lower, with the 2s10s flatter. The implied long-end swap spread was 5bps wider.
• RBNZ dated OIS pricing closed 1-12bps softer across meetings, with Oct’24 leading. Terminal OCR expectations softened to 5.55%.
• Tomorrow the local data calendar is empty, with RBNZ Governor Orr’s speech on Climate Change Response as the highlight.