NZGBS: Cheaper, Pares Post-CPI Rally, US Tsys Push To Cycle Cheaps

In local morning trade, NZGBs are 2-6bps cheaper after US tsy yields were pushed to or close to cycle highs after another batch of hot data. Retail sales were strong, with the ex-auto and gas measure rising by 0.6% m/m in September, above the 0.1% expected. Later, the strength of domestic data was reinforced by an upward revision to the Atlanta Fed’s GDPNow to 5.4% annualised for Q3. There was minimal reaction to the NAHB housing index dropping to its lowest since January. There was also further political uncertainty after Jim Jordan failed to secure the speaker's gavel in a first roll call in the House.

• US tsys finished 8-15bps cheaper, with the belly underperforming. The 5-year yield rose to a new cycle high of 4.89% before ending at 4.87%, +15bps on the day.
• Swap rates are 4-7bps higher, with the 2s10s curve steeper and the short-end implied swap spread wider.
• RBNZ dated OIS pricing is flat to 4bps firmer across meetings, unwinding some of yesterday’s post-CPI softening. Nevertheless, pricing remains 5-7bps softer than pre-CPI levels. Terminal OCR expectations sit a 5.66% versus the pre-CPI level of 5.72%.
• Today, the local calendar is empty, with the next key release being the September Trade Balance data on Friday.