NZGBS: Cheaper After Stronger-Than-Expected Employment Data

In local morning trade, NZGBs are 6-8bps cheaper on the day, with a flatter 2/10 curve, after the release of a stronger-than-expected Q2 Employment Report.

• Q2 employment rose 0.4% q/q (+0.6% y/y) versus expectations of -0.2% (0%). Average Hourly Earnings rose 1.1% q/q.
• "Almost half the annual growth in unemployment and underutilisation came from young people, while wage growth remained strongest in the public sector, according to figures released by Stats NZ today."
• Overnight, US tsy yields were pushed higher as risk appetite returned to the market. The cash tsy curve bear-steepened, with yields were 5-11bps higher. The US 2-year briefly traded back above 4%, before closing +5.5bps at 3.98%. The US 10-year closed +10bps at 3.89%.
• According to MNI’s technicals team, Monday's gains in the US 10-year futures contract reinforced the current bullish condition. Note that MA studies are in a bull-mode position too and the recent breach of 111-01, Jun 14 high, confirmed a resumption of the uptrend.
• Swap rates are 6-7bps higher after the data.
• RBNZ dated OIS pricing is 2-10bps firmer across meetings, with 2025 meetings leading. The market has a 70% chance of a cut in August priced versus 78% before the data. A cumulative 90bps of easing is priced by year-end versus 97% before.