NZGBS: Cheaper, US Tsys Pare Middle East Induced Gains But End Of Trading On Friday

In local morning trade, NZGBs are 4bps cheaper after US tsys finished modestly richer on Friday, after reversing earlier strength on news that Israel had launched targeted attacks against Iran. Gold and oil prices surged on the news before paring gains after Tehran appeared to play down the retaliation, in a sign that further escalation might happen.

• US markets had a mixed response to the attacks on Friday. The S&P 500 and Nasdaq Composite retreated by 0.8% and 2%, respectively, while the Dow gained 0.6%.
• Also on Friday, the Federal Reserve entered its self-imposed media Blackout regarding policy.
• According to MNI’s technicals team, a bear cycle in US tsy futures (TYM4) remains in play and short-term gains are considered corrective.
• Swap rates are 4-5bps higher.
• RBNZ dated OIS pricing is little changed. A cumulative 58bps of easing is priced by year-end.
• Today, the local calendar is empty until Trade Balance data on Wednesday.
• The results of RBNZ stress testing of NZ’s five largest banks to withstand severe but plausible long-term climate-related challenges showed that it “did not threaten bank solvency, as all banks were able to maintain their capital ratios”.
• Also on Wednesday, Australia releases Q1 CPI data.