NZGBS: Cheaper With US Tsys Ahead Of Jackson Hole

In local morning trade, NZGBs are 3bps cheaper after US tsys finished weaker following steady to mixed data and cautious comments from Fed’s Schmid ahead of the Jackson Hole Symposium.

• The Fed could be approaching the time to reduce interest rates, but it must make sure inflation is coming down sustainably to its 2% target, Kansas City Fed President Jeffrey Schmid said Thursday. “We’ve got some data sets to come in before September, I want to be thoughtful about it,” Schmid told CNBC in an interview. “I’m taking a harder look at it, I’m going to let the data show where we lead.”
• US initial jobless claims were in line at 232k, with the four-week moving average looking like a plateau rather than suggesting any further deterioration in the labour market.
• A poor TIPS sale also probably weighed on the market. The benchmark 2-year yield rose 7bps to 4.00%. The 10-year yield increased 5bps to 3.85%.
• Retail Sales Ex Inflation fell 1.2% q/q (estimate -0.9%) in Q2 versus a revised +0.4% in Q1.
• Swap rates are 3-4bps higher.
• RBNZ dated OIS pricing is flat to 2bps firmer across meetings. A cumulative 71bps of easing is priced by year-end.