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Richer But Underperforms $-Bloc

BONDS

NZGBs strengthened 10-13bp at the close, resulting in a 3bp steeper 2s10s cash curve. NZGBs caught up with the two-day richening in US Tsys since the local market close before yesterday's ANZAC day holiday. Although morning strength waned, NZGBs rebounded to close near session highs after ACGBs strengthened in response to lower-than-expected core CPI data. However, NZGBs underperformed in comparison to the $-Bloc with the 10-year yield differentials for NZ/US and NZ/AU both 5bp wider compared to Monday's close.

  • Swap rates closed 12-13bp lower with implied swap spreads marginally tighter at the long-end.
  • RBNZ dated OIS closed with pricing 5-10bp softer for meetings beyond May with terminal OCR expectations at 5.48% versus 5.52% at Monday’s close.
  • The local calendar sees ANZ Business scheduled for release tomorrow and Consumer Confidence on Friday.
  • The RBNZ proposed changes to the LVR restrictions in a statement on its website saying that house prices have fallen to a level that is more consistent with medium-term fundamentals. Accordingly, the risk to financial stability posed by high-LVR lending has been reduced.
  • The NZ Treasury announced that it plans to sell NZ$1.6bn of NZGBs in May with each weekly auction being NZ$400mn.
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