NZGBS: Cheaper With US Tsys After US Payrolls Beat, RBNZ Policy Decision On Wednesday

In local morning trade, NZGBs are 6bps cheaper after US tsys finished the week with yields sharply higher following the surprisingly strong Nonfarm Payroll Report (303k vs. 214k est, 275k prior down revised to 270k).

• The front end of the US curve underperformed as market expectations for Fed rate cuts were trimmed further. The move was supported by the FOMC's stance that there is no rush to cut.
• The 2-year yield ended 10bps higher at 4.750%, with the 10-year yield up by 9bps to 4.40%.
• US equity indices were stronger by 0.8-1.2%.
• Swap rates are 5-6bps higher.
• This week’s domestic calendar highlight is the RBNZ Policy Decision on Wednesday. Consensus is unanimous in expecting the OCR to be left unchanged at 5.50%.
• (Bloomberg) Shadow Board members recommended the Reserve Bank keep the Official Cash Rate at 5.5% this week. Members “agreed that inflation was easing, but there was uncertainty over whether the pace of this easing would be enough to bring annual CPI inflation back within the inflation target band over the coming year”: NZIER (See link)
• RBNZ dated OIS pricing gives a 25bp rate hike a 4% chance. More notable is the fact that a cumulative 65bps of easing remains priced by year-end.