NZGBS: Cheaper Following Q4 Employment & Wages Beat

In local morning trade, NZGBs are 4-6bps cheaper across benchmarks after the release of Q4 employment and wages data. The numbers were stronger than expected across the board: Employment Change 2.4% q/q vs 2.1% est. and an upwardly revised 2.7% prior, Unemployment Rate 4.0% vs 4.3% est. and 3.9% prior and Private Wages Including Overtime 1.0% q/q vs 0.8% est and 0.9% prior.

• Ahead of the data drop, NZGBs were little changed despite US tsys finishing the NY session with solid gains after two heavy days of selling. US tsys finished 4-8bps richer across benchmarks.
• There was a muted initial reaction to Cleveland Fed Mester economic outlook comments, which were largely in line with Chairman Powell's comments: "POLICY IS IN A GOOD PLACE, MISTAKE TO CUT RATE TOO SOON … CAN'T COUNT AS MUCH ON SUPPLY SIDE TO LOWER INFLATION”.
• However, while addressing the media later in the afternoon, Mester reiterated the likelihood of three rate cuts in 2024. MN Fed President Kashkari also sounded more placative of late.
• Swap rates are 5-7bps higher on the day, with the 2s10s curve flatter.
• RBNZ dated OIS pricing 3-4bps firmer for meetings beyond July. A cumulative 82bps of easing is priced by year-end compared to 96bps last Friday.