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NZGBS: Yields Higher, US Tsys Pressured By Corporate Issuance

BONDS

NZGBs opened 7-8bp weaker after US tsys held weaker in NY trade with the curve steeper. Tsys briefly strengthened after weaker than expected Empire Mfg Index but quickly reversed and held in a narrow range for the session. A surge of swappable corporate issuance kept pressure on rates with over a dozen issuing nearly $18bn of debt. There is more to follow as the latest quarterly earnings season winds down.

  • Swap rates are 6-11bp higher with the 2s10s curve 5bp flatter.
  • RBNZ dated OIS opened 5-14bp firmer across meetings with late’23 leading. 27bp of tightening is now priced for the May 24 meeting.
  • According to Westpac, the RBNZ will need to raise the OCR to 6.0% to be assured of taming inflation with surging migrant arrivals preventing the economy from slowing as much previously expected.
  • The local calendar is light today with Non-Resident Bond Holdings as the only data.
  • The focus will however be abroad today, starting with the release of Australia's RBA Minutes for May. Analysts will be looking for insights after the unexpected 25bp hike. Additionally, investors will be keeping a close eye on China's monthly data dump, which will be important given the weak data releases last week.
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