NZGBS: Weaker But Off Cheaps After Solid Digestion Of Weekly Supply

NZGBs closed 4-5bp cheaper but off session cheaps after today’s weekly auction covering the May-30, Apr-33 and Apr-37 NZGB lines shows solid demand with the respective cover ratios printing 4.10x, 4.93x and 3.98x. In post-auction trading, these cash lines closed 2-3bp lower in yield.

• Nonetheless, NZGBs have underperformed the $-bloc with NZ/US and NZ/AU 10-year yield differentials both 5bp wider.
• Swap rates are 2-4bp higher with implied swap spreads tighter.
• RBNZ dated OIS pricing is flat to 4bp firmer across meetings with Feb’24 leading.
• The May trade surplus narrowed to NZ$46mn from a downwardly revised NZ$236mn. This left the YTD deficit slightly wider at NZ$17.12bn from NZ$17.02bn. Good exports rose 2.8% y/y and imports +4.4% y/y.
• The RBNZ released research on the importance of inflation expectations when forecasting the CPI. It finds that its headline inflation projections are more accurate when expectations are included and that the 1-year mean household inflation expectations have the best forecasting power. (See link)
• The local calendar is light tomorrow.
• Later today sees the BoE policy decision, with a 25bp hike expected, ahead of Fed Chair Powell’s reappearance at Senate Banking Committee.