Slightly Cheaper, US Tsys Weaker Higher Ahead Of Weekend

NZGBs opened 2-3bp cheaper after US tsys weakened in trade ahead of the weekend. After the bell on Friday, US tsys were holding near lows with the short-end underperforming. UofM’s confidence fell but 5-10 years inflation expectations rose to a 12-year high of 3.2%.

• Swap rates opened flat to 2bp higher with the 2s10s curve steeper, and the implied short-end swap spread tighter.
• RBNZ dated OIS opened flat to 1bp firmer out to Feb’24 with 21bp of tightening priced for the upcoming May 24 meeting.
• NZ announced a NZ$1 billion flood and cyclone recovery package as part of its yearly budget, after being smashed by rough weather including a cyclone that ravaged the country’s North Island.
• The local calendar is relatively light with April’s PSI as the highlight.
• The weekly highlight however is likely to be the NZ Budget on Thursday. The government has signalled that Budget 2023 will focus on alleviating cost-of-living pressures, fast-tracking recovery from Cyclone Gabrielle, and maintaining public services, but not much else. The operating balance is expected to reach surplus in 2025/26, one year later than previously flagged. Budget 2023 will be delivered less than 5 months before the General Election.