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BONDS: NZGBS: Cheaper With US Tsys After Strong ISM Services

BONDS
BulletMarketsFixed Income Bullets

In local morning trade, NZGBs are 2-3bps cheaper after US yields finished higher following mixed US data. The 2yr yield closed +6.3bps at 3.706%, while the 10yr closed +6.4bps at 3.847%. Expectations for another 50bp rate cut on November 7 were also reduced.

  • ISM Services was stronger than expected with some genuinely strong readings for prices paid and new orders. However, the employment index fell back into contractionary territory, which took some of the gloss off an otherwise strong report.
  • Initial jobless claims increased to 225k (sa, cons 221k) in the week to Sep 28 after a slightly upward revised 219k (initial 218k).
  • NZ’s filled jobs rose 0.2% m/m in August versus a revised -0.2% in July. This was the first rise in five months.
  • Swap rates are 2-4bps higher.
  • RBNZ dated OIS pricing is 1-5bps firmer across meetings, with -44bps priced for next week's meeting. A cumulative 92bps of easing is priced by year-end. 
  • The RBNZ will deliver its policy decision on Wednesday, with consensus expecting a 50bp cut. Data since the August meeting have shown a faster-than-expected deterioration in the labour market and a swifter pullback in inflation pressures.
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In local morning trade, NZGBs are 2-3bps cheaper after US yields finished higher following mixed US data. The 2yr yield closed +6.3bps at 3.706%, while the 10yr closed +6.4bps at 3.847%. Expectations for another 50bp rate cut on November 7 were also reduced.

  • ISM Services was stronger than expected with some genuinely strong readings for prices paid and new orders. However, the employment index fell back into contractionary territory, which took some of the gloss off an otherwise strong report.
  • Initial jobless claims increased to 225k (sa, cons 221k) in the week to Sep 28 after a slightly upward revised 219k (initial 218k).
  • NZ’s filled jobs rose 0.2% m/m in August versus a revised -0.2% in July. This was the first rise in five months.
  • Swap rates are 2-4bps higher.
  • RBNZ dated OIS pricing is 1-5bps firmer across meetings, with -44bps priced for next week's meeting. A cumulative 92bps of easing is priced by year-end. 
  • The RBNZ will deliver its policy decision on Wednesday, with consensus expecting a 50bp cut. Data since the August meeting have shown a faster-than-expected deterioration in the labour market and a swifter pullback in inflation pressures.