NZGBS: Bear-Steepening As Fed Dudley Supports Near-Term Cut

In local morning trade, the NZGB 2/10 curve has bear-steepened, with yields flat to 2bps higher, after US tsys finished the NY session with a twist-steepening of the curve. The US 2-year yield finished 6bps lower at 4.43% versus a 3bps rise for the US 10-year.

• Short-end rates were well bid after former NY Fed President Dudley suggested rate cuts were warranted now, not later in the year. In turn, projected rate cut pricing into year-end strengthened from yesterday's levels: Sep'24 cumulative -27bps (-25bps), Nov'24 cumulative -43bps (-40bps) and Dec'24 -65bps (-63bps).
• Short-end US tsys were also supported by weaker US equities, which were led lower by the mega-cap and IT stocks. The Nasdaq index was down 3.5% with the S&P500 down around 2%.
• Swap rates are 1bp lower to 1bp higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing slightly softer across meetings. A 55% chance of a cut in August is priced, with a cumulative 90% priced by October. A cumulative 75bps of easing is priced by year-end.
• Today, the local calendar is empty.
• Today, the NZ Treasury plans to sell NZ$300mn of the 3.0% Apr-29 bond and NZ$200mn of the 4.50% May-35 bond.