NZGBS: Weaker Ahead of Pricing Of New May-30 Bond

Ahead of pricing for the new May-30 bond, NZGBs open 5-6bp weaker following the lead from U.S. Tsys in NY trade. The NZ Treasury announced the launch yesterday of the new 4.50% 15 May 2030 bond, sized at a minimum of NZ$3.0bn, capped at NZ$5.0bn (indications are that demand had exceeded the top end of the range as of yesterday's close), with pricing planned for today. Initial price guidance was 2 to 5 basis points over the 20 April 2029 nominal bond. Yesterday, the NZGB 10-year benchmark strengthened but underperformed its $-bloc peers with the NZ/US and NZ/AU 10-year yield differentials respectively 3bp and 4bp wider. That underperformance has continued today with the 10-year yield differentials respectively 3bp and 5bp wider.

• Swaps open with the 2s10s curve 1bp steeper and rates 4-6bp higher, implying slightly tighter swap spreads.
• RBNZ dated OIS was flat to +5bp firmer across meetings with Nov-23 and Feb-24 leading. April meeting pricing remains around 40bp of tightening with terminal OCR pricing back at the RBNZ’s projected OCR peak of 5.50%.
• The local docket is light until February’s card spending data on Thursday.
• Elsewhere, the RBA is expected to hike 25bp at today’s Policy Decision Meeting. With such a move almost fully priced, the market will be on the lookout for any changes in policy guidance after the recent run of slower-than-expected data. RBA Governor Lowe speaks at the AFR Business Summit tomorrow.