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NZGBS: Cheaper, US Tsy Yields Push To Highest Levels Since 2007, Q2 BoP Due

BONDS

In local morning trade, NZGBs are 4bps cheaper after US tsy yields pushed to their highest levels since 2007 ahead of the FOMC decision later today. The 2-year US tsy yield hit 5.109%, while the 10-year saw 4.3647%. Hotter-than-anticipated inflation data in Canada for the second straight month and rising oil prices added to global concerns about resurgent price pressures. Canadian yields surged, with the 10-year yield rising 12bps to 3.86%.

  • Traders expect the Fed to keep rates on hold with a tightening bias. The median of analysts’ expectations for the Fed’s September Dot Plot rates suggests that the central expectation is for no changes from June’s projections: 5.6% for 2023, 4.6% for 2024, 3.4% for 2025, with the new entry for 2026 at 2.6%, and the Longer-Run rate at 2.5%.
  • Prices lifted at last night’s Global Dairy Trade event, with the overall GDT Price Index up 4.6%. The whole milk powder index (WMP) also rose 4.6%. That builds on the 5.2% rise in WMP at the preceding GDT event in early September.
  • Swap rates are 4bps higher.
  • RBNZ dated OIS pricing is flat to 4bps firmer, with May’24 leading.
  • Today the local calendar sees BoP Current Account Balance (Q2), ahead of GDP (Q2) tomorrow.
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