NZGBS: Cheaper, US Tsys Heavy, Look Past CPI To 30Y Auction & Budget Deficit

In early local trade, NZGBs are 4bp cheaper after US tsys finished near late session lows, 3-10bp cheaper across benchmarks, after initially gapping to session highs following this morning's July CPI: core m/m 0.16% vs. 0.2% est. Core goods deflation accelerated to -0.33% m/m from -0.05% m/m.

• Initial jobless claims also supported US tsys early by increasing to 248k (cons 230k) after an unrevised 227k, for its largest weekly increase since early June.
• However, those gains were erased following a disappointing 30-year auction and a big budget deficit. the Treasury reported a larger-than-expected budget deficit with outlays sharply boosted by higher interest payments. That added to the angst regarding the massive debt problem stressed by the Fitch downgrade.
• Swap rates are 4-6bp higher with the 2s10s curve steeper.
• RBNZ dated OIS pricing is little changed across meetings.
• Bloomberg expects the RBNZ to keep rates unchanged on Aug. 16. Since its July decision to hold rates at the likely peak of the tightening cycle, the unemployment rate has risen and inflation has undershot its projections. Both support another hold. (See link)
• Today the local calendar sees July’s Manufacturing PMI and Food Price Index. Manufacturing conditions continue to soften, with production and orders weak.