NZGBS: Weaker But Outperforms The $-Bloc

NZGBs closed 3-4bp cheaper within a relatively narrow range. The local market grappled with conflicting factors, including the dovish hike by the RBNZ and the upward pressure on global yields due to the ongoing uncertainty surrounding the debt ceiling. Accordingly, NZGBs have maintained yesterday’s outperformance in the $-Bloc with NZ/US and NZ/AU 10-year yield differentials 3bp and 2bp respectively lower.

• The strong relative performance of NZGBs was supported by solid auction results for the May-28 and Apr-33 bonds, which exhibited higher cover ratios compared to their previous auctions. However, it is worth noting that the cover ratio for the May-51 bond was relatively low at 2.46x, in contrast to the prior auction result of 4.42x.
• Swap rates closed 3-4bp higher with the 2s10s curve unchanged and implied short-end swap spreads wider.
• RBNZ dated OIS closed with pricing 5-7bp firmer for meetings beyond August. Terminal rate expectations sit at 5.63%. A 30% chance is attached to a 25bp hike in July.
• The local calendar remains light tomorrow with ANZ Consumer Confidence as the highlight.
• Later today sees the release of Q1 US GDP (2nd estimate).