NZGBS: Cheaper With $-Bloc Bonds After Surprise YCC Tweak From BoJ

NZGBs closed 4-9bp weaker, but off session cheaps, as $-bloc bonds react to the surprise decision by the BoJ to tweak its yield curve control (YCC) policy. The BoJ maintained the policy balance rate at -0.1% and the 10-year JGB target at about 0% but adjusted YCC to be flexibly managed. In other words, the BoJ said that the +/- 0.5% range around 0% in the 10-year JGB will be a “reference, not a rigid limit”.

• US tsys sit 2bp richer to 2bp cheaper as the curve twist steepens, pivoting on 5s. US tsys have see-sawed in recent dealing as JGBs provide the lead in Asia. Tsys initially firmed alongside JGBs in the aftermath of the BoJs rate decision. Losses have been marginally pared in recent dealing.
• Swap rates are 7-12bp higher with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed flat to 7bp firmer across meetings, with Jul’24 leading. Terminal OCR expectations sit at 5.66%.
• Next week the local calendar sees ANZ Business Confidence (Jul) on Monday, CoreLogic House Prices (Jul) and Building Permits (Jun) on Tuesday and Q2 Employment and Wages data on Wednesday.
• Later today, the US calendar sees the release of the Q2 Employment Cost Index along with the June PCE deflator.