Closed On A Strong Note, Q2 CPI On Wednesday

NZGBs closed on a strong note with benchmark yields 4-5bp richer. The local market has played catch-up to global bond market developments following Friday’s public holiday.

• On the domestic data front, NZ’s performance of services index fell to 50.1 in June from 53.3 in May. Three of five sub-indexes printed above 50 with employment dipping to 49.1, and inventories dropping to 47.3. At the margin, this, along with China’s underwhelming economic data, would have supported the strengthening through the session.
• On balance, China's Q2 GDP print, and mixed June activity data, are likely to see calls for policy support continue. Notwithstanding the base effect impact on today's outcomes.
• US tsy futures were little changed in Asia-Pac trade, with cash tsys closed due to a Japanese public holiday.
• Swap rates are 5-7bp lower with the 2s10s curve 2bp flatter.
• RBNZ dated OIS pricing is 1-3bp firmer for ’24 meetings with terminal OCR expectations at 5.63%.
• Tomorrow the local calendar is light ahead of Q2 CPI data on Wednesday. BBG consensus expects headline CPI to print +0.9% q/q in Q2 with the annual rate dropping to 5.9% y/y from 6.7%.
• Tomorrow also sees the release of the RBA Minutes for the July meeting.