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Cheaper With US Tsys, Looks Past NZ Q3 CPI Miss


ACGBs (YM -6.0 & XM -7.5) are cheaper on the day, largely ignoring the NZ Q3 CPI miss, after US tsys finished the NY session with yields 5-11bp higher. The US curve bear steepened. US tsys reversed the bull flattening seen on Friday and sit at post-US CPI levels. Although geopolitical tensions remain high the reversal is attributed to no further escalation in the Israel/Hamas conflict as of yet. A firmer-than-forecast Empire Mfg print weighed on the space. The six-month ahead metric is at pre-pandemic levels.

  • NZGBs are 3-7bps richer after Q3 CPI surprises on the downside, printing +1.8% q/q and +5.6% y/y versus estimates of +1.9% and +5.9%. The NZ-AU 10-year yield differential is 7bps tighter on the day at +85bps.
  • Cash ACGBs are 5-7bps cheaper, with the AU-US 10-year yield differential 1bp higher at -18bps.
  • Swap rates are 4-6bps higher, with the 3s10s curve steeper and EFPs slightly tighter.
  • The bills strip has bear-steepened, with pricing -1 to -6.
  • RBA-dated OIS pricing is flat to 4bps firmer across meetings, with terminal rate expectations 1bp firmer at 4.22%. By contrast, RBNZ dated OIS is 6-10bp softer after the CPI miss.
  • Today, the local calendar sees the RBA Minutes for the October meeting. Australia’s Q3 CPI is released on October 25.

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