NZGBS: Yields Sharply Lower, RBNZ Signals OCR At Peak

NZGB yields have closed 11-33bp lower after the RBNZ Decision proved to be a dovish hike.

• The RBNZ hiked 25bp to 5.5%, which aligned with its previous projection for the OCR peak. 5 members opted for the hike while 2 advocated for a pause.
• The statement released by the RBNZ primarily focused on the impact of restrictive policies and acknowledged the presence of transmission lags. Notably, the Committee appeared unconcerned about the near-term fiscal expansion and the rise in immigration.
• Based on the current scenario, it appears increasingly likely that the RBNZ will keep rates unchanged at its upcoming meeting on July 12.
• Ahead of the RBNZ Decision, the market had been pricing 37bp of tightening for today's meeting and a terminal rate of 5.93%. Post-Decision, the terminal rate has softened to 5.60%.
• Swap rates are 11-34bp lower with the 2s10s curve 23bp steeper.
• Q1 retail sales volumes fell a larger-than-expected 1.4% q/q in Q1 to be down 4.1% y/y, as significant tightening and cost-of-living pressures weighed on spending.
• The local calendar is light tomorrow.
• The NZ Treasury announced that they plan to sell NZ$200mn of the May-28 bond, NZ$150mn of the Apr-33 bond and NZ$50mn of the May-51 bond tomorrow.