NZGBS: Cheaper, US 10Y Yield Highest Since 2007

In early local trade, NZGBs are 4bp cheaper after US tsy yields resumed their rise after a brief reprieve on Friday. The long end maintained its underperformance with the 10-year yield climbing another 8bp to hit 4.35%, a fresh peak since late 2007, before finishing at 4.34%. There were no obvious headlines, data or Block/cross drivers for the bear steepening of the curve (2Y10Y +4bp at -66).

• The pivotal economic event of this week centres on the speech by Fed Chair Powell at the Jackson Hole gathering on Friday. The prevailing concern is that Powell might undermine investors' optimistic expectations, specifically the notion that the Federal Reserve has concluded its interest rate hikes and is poised to initiate rate cuts in the early months of the upcoming year.
• Swap rates are 4-5bp higher with the 2s10s curve steeper.
• RBNZ dated OIS is little changed across meetings, with terminal OCR expectations at 5.70%.
• Today the local calendar is empty, ahead of Q2 Retail Sales Ex-Inflation on Wednesday. Spending appetites likely remained subdued through the June quarter. The softness in retail spending reflects that high inflation and interest rate rises have squeezed households' purchasing power.