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NZGBS: Cheaper, Local Market Plays Catch-up After An Extended Weekend


With the NZ debt market closed on Monday for the long weekend there has been upward pressure on NZGBs at the open with yields 9-11bp higher as the local market plays catch-up with the post-payroll sell-off in US tsys that extended into early NY trade yesterday.

  • US tsys however reversed early losses after May ISM services missed (50.3 vs cons 52.4), printing the lowest since Dec'22. The Prices Paid index was notable, dropping to its lowest since May'20. The employment component also fell back below 50 (49.2) for the first time since December.
  • FOMC-dated OIS was little changed for near-term meetings June +7bp (unch) and July +20bp (-1.5bp) for a terminal that doesn't fully price another hike.
  • Swap rates opened 5-8bp with the 2s10s curve 3bp steeper.
  • RBNZ dated OIS opened 1-4bp firmer across meetings with May’24 leading.
  • The local calendar is light this week with ANZ Commodity Prices (today) and Mfg Activity (tomorrow) as the only releases. The NZ Government is also scheduled to release its 10-month Financial Statement tomorrow.
  • The Antipodean highlight today however will be the RBA Policy Decision (0530 BST) with a no-change outcome expected, although not unanimous. The market has attached a 42% chance of a 25bp hike.

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