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BONDS: NZGBs Richer, Curve Steepens, Services Industry Contracts Again

BONDS
BulletMarketsFixed Income Bullets

NZGBs are slightly richer this morning with curves bull-steepening, largely tracking moves made on Friday by US tsys. It will be a slow session in the APAC today with China & Japan Both out. Earlier we had Performance Services Index which showed a slight increase to the revised number from July.

  • Over the weekend, China's Industrial Production fell to 4.5% from 5.1% in July missing expectations of 4.7%, Retail Sales fell to 2.1% from 2.7% prior and missed expectations of 2.5%. Investment also slowed more than expected in August, while the jobless rate reached a six-month high. Weak credit data further reflected low private confidence, prompting the central bank to signal more deflation-fighting measures and potential economic stimulus
  • New Zealand’s Performance of Services Index rose slightly to 45.5 in August from 45.2 in July although this marked the sixth consecutive month of contraction, the longest such period since the global financial crisis. Although still below the 50 threshold indicating growth, the gauge has recovered from a three-year low of 41 in June. All five sub-indexes remain in contraction, with the activity measure rising to 43.9. The composite index, which includes the PMI, increased to 45.6 from 45.0 in July
  • The NZGB curve has bull-steepened this morning, with yields trading 1-2.5bps lower. The 2yr is -2.2bps at 3.849%, while the 10yr is -0.7bps at 4.074% both at new cycle lows
  • Swap rates are 1-3.5bps lower this morning with better buying seen through the 2-3yr tenors
  • RBNZ dated OIS was little changed on Friday, with 83bps of cuts priced in through until year-end. Pricing through to July 2025 has firmed slightly with 196bps of cuts priced in, up 6bps.
  • Focus for New Zealand this week will be on GDP due out Thursday.
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NZGBs are slightly richer this morning with curves bull-steepening, largely tracking moves made on Friday by US tsys. It will be a slow session in the APAC today with China & Japan Both out. Earlier we had Performance Services Index which showed a slight increase to the revised number from July.

  • Over the weekend, China's Industrial Production fell to 4.5% from 5.1% in July missing expectations of 4.7%, Retail Sales fell to 2.1% from 2.7% prior and missed expectations of 2.5%. Investment also slowed more than expected in August, while the jobless rate reached a six-month high. Weak credit data further reflected low private confidence, prompting the central bank to signal more deflation-fighting measures and potential economic stimulus
  • New Zealand’s Performance of Services Index rose slightly to 45.5 in August from 45.2 in July although this marked the sixth consecutive month of contraction, the longest such period since the global financial crisis. Although still below the 50 threshold indicating growth, the gauge has recovered from a three-year low of 41 in June. All five sub-indexes remain in contraction, with the activity measure rising to 43.9. The composite index, which includes the PMI, increased to 45.6 from 45.0 in July
  • The NZGB curve has bull-steepened this morning, with yields trading 1-2.5bps lower. The 2yr is -2.2bps at 3.849%, while the 10yr is -0.7bps at 4.074% both at new cycle lows
  • Swap rates are 1-3.5bps lower this morning with better buying seen through the 2-3yr tenors
  • RBNZ dated OIS was little changed on Friday, with 83bps of cuts priced in through until year-end. Pricing through to July 2025 has firmed slightly with 196bps of cuts priced in, up 6bps.
  • Focus for New Zealand this week will be on GDP due out Thursday.