NZGBS: Weaker Ahead Of Tomorrow’s Supply

NZGBs closed the day 4bp cheaper with the NZ/US 10-year yield differential 6bp wider. The NZ Treasury’s weekly supply announcement led to a 2-3 basis point increase in yields across the curve, although this move had subsided by the close. With the composition of tomorrow’s auction the same as April 6, it will be interesting to see whether the May-26 bond will receive a similarly strong bid (cover ratio of 6.25x) and whether it will deliver the same sharp steepening in the 2/10 cash curve.

• The NZ Treasury plans to sell NZ$200mn of the May-26 bond, NZ$150mn of the May-34 bond and NZ$50mn of the May-41 bond tomorrow.
• Swap rates closed 2-4bp higher with implied swap spreads 1-2bp tighter.
• RBNZ dated OIS closed 1-5bp firmer across meetings. 23bp of tightening is priced for the May meeting.
• A Bloomberg News survey of 22 economists showed the NZ economy was expected to expand by 1.0% in 2023, 1.3% in 2024 and 2.5% in 2025.
• Tomorrow sees the release of Q1 CPI. 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.