Curve Steepens As Aug Rate Cut Firms, Consumer Confidence Jumps

In local morning trade, the NZGB curve has bull-steepened, with yields flat to 1bps lower, after US tsys finished the NY session with a bull-flattening of the curve. New Zealand just released Consumer Confidence which jumped 5.6% in July to 87.69 the highest reading since Feb.

• Short-end US rates erased some of the outperformance from recent days overnight as GDP data came in well above expectations. US rate cut expectations were little changed heading into the September meeting with OIS pricing 25bps of cuts, while we softened a touch heading into December with a cumulative 62bps of cuts.
• NZGB curve has bear-steepened throughout the week, with yields on 1-4yr tenors 1-5bps richer, while the long-end cheapened 4-10bps.
• Swap rates are 1bp higher in the front-end and unchanged further out the curve
• RBNZ dated OIS pricing has firmed in August with a 66% chance of a cut now priced, while we soften heading into year-end with October pricing in 37bps of cuts and November 77bps of cuts down from 80bps.
• Cross-asset: The Kiwi has fallen about 2% this week as yen carry trades unwind, the NZX 50 is currently up 0.36% this week far out-performing Global markets with the MSCI Asia Pacific down 2.23%, this was largely due to just three companies though.
• The calendar is reasonably light for the week ahead with Building Permits & ANZ Business Confidence on Wednesday