NZGBS: Cheaper As Rate Cut Expectations Are Pared

In local morning trade, NZGBs are 1-7bps cheaper, with the 2/10 curve steeper, after US tsy yields moved higher as traders pared their bets for a pivot to rate cuts by the Federal Reserve. Today is NZGBs first trading day of the year.

• US tsys finished 5-8bps cheaper across the major benchmarks. Losses were however pared after Construction Spending (0.4% m/m vs. 0.5% est.) and S&P Global US Manufacturing PMI (47.9 vs. 48.4 est) printed weaker-than-expected.
• The first real test this year to market easing expectations will come on Friday with the release of Non-Farm Payrolls. That said, December ISM Manufacturing is due later today.
• Elsewhere, Apple led losses in US equities after being downgraded by Barclays, which questioned demand for its latest iPhone. Apple shares were down slightly less than 4% on the day.
• The AFR reported that Goldman Sachs said “In 2024, we expect decelerating inflation and Fed easing will keep real yields low and support a P/E multiple greater than 19x. We forecast that in 2024 S&P 500 EPS will grow by 5 per cent to $US237 and the index will reach 5100 by year-end.”
• Swap rates are 5-8bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is flat to 4bps firmer across meetings, with October leading.
• Today, the local calendar is empty.