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NZGBS: Bear-Steepening After Stronger Than Expected Labour Market Data Weighs On US Tsys

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In local morning trade, NZGBs are flat to 8bps cheaper after US tsys finished 5-8bps cheaper, with the curve steeper. US tsys opened weaker then extended lows after higher-than-expected ADP Employment Change data (164k vs 125k est) and then again after lower than expected Initial Jobless Claims (202k vs. 216k est). The market now awaits Non-Farm Payrolls data later today.

  • Bloomberg consensus sees employment growth of 175k in December after November’s 199k was boosted by 38k workers returning from strikes. The public sector is expected to see further above-average job creation with private sector focus on health & social assistance as well as retail.
  • Projected rate cuts for early 2024 continue to cool after a brief move higher yesterday after the release of the Dec'23 FOMC Minutes. March 2024 chance of rate cut 63% vs. 66.8% yesterday (84.3% last Friday).
  • Swap rates are 7-8bps higher, with the short-end implied swap spread wider.
  • RBNZ dated OIS pricing is flat across meeting out to May then 2-3bps firmer beyond. The cumulative easing by November 2024 has been scaled back to 102bps.
  • Today, the local calendar is empty.

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