NZGBS: Weaker, Off Cheaps, Outperforms $-Bloc

NZGB benchmarks closed 2-3bp higher, off session cheaps, after weekly supply showed decent demand (cover ratios of 3.34-3.74). Yields were as much as 1.5bp lower post-auction. NZ/US and NZ/AU 10-year yield differentials both closed 2bp tighter.

• Swap rates closed 5-6bp higher with implied swap spreads wider.
• RBNZ dated OIS closed flat to 3bp firmer across meetings.
• Prime Minister Chris Hipkins, in a pre-Budget speech, has announced that the government will not impose a levy to pay for the recovery from recent natural disasters. The estimated costs of these disasters are between NZ$9-14.5bn, and the government will fund the recovery through a combination of operating and capital allowances, savings, reprioritizations, and some debt. The upcoming budget (May 18) will not introduce any major new taxes, such as a wealth tax or capital gains tax.
• ANZ business activity indicators remained stable in April while inflation signals decreased, indicating progress for the RBNZ. However, a significant percentage of firms continue to experience high costs and intend to raise prices, suggesting that the RBNZ has more work to do.
• With the Antipodean calendar light for the remainder of the week, the local market will likely be guided by US Tsys as they navigate Q1 GDP later today and the March PCE Deflator tomorrow.