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NZGBS: Closed On A Strong Note, Q2 CPI Tomorrow

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NZGBs closed on a strong note, with benchmark yields 6-7bps lower.

  • Outside of the Non-Resident Bond Holdings, there hasn't been much in the way of domestic drivers to flag. NZ bonds held by foreigners fell to 60.7% in June from 61.5%.
  • Cash US tsys are 1-2bps richer in today’s Asia-Pac session, ahead of Retail Sales and Import/Export Prices data, and bank earnings.
  • Today’s move brings the cumulative post-RBNZ Decision rally to 27-35bps, with the 2/10 curve 8bps steeper.
  • It is also noteworthy that the NZGB 10-year yield finished at its lowest closing level this year at 4.37%.
  • On a relative basis, as well, the recent rally has been impressive, with the NZ-AU 10-year yield differential closing at +12bps, its lowest level since August 2022.
  • Tomorrow, the local calendar will see Q2 CPI. Bloomberg consensus expects headline to moderate to 0.5% q/q and 3.4% y/y from 0.6% and 4% in Q1, while the RBNZ forecast in May that it would ease to 3.6% y/y with a 0.6% quarterly rise.
  • The RBNZ will present revised forecasts at its August 14 meeting and the Q2 CPI will be important in determining if the target return is brought forward and thus also the first rate cut in the OCR profile.
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NZGBs closed on a strong note, with benchmark yields 6-7bps lower.

  • Outside of the Non-Resident Bond Holdings, there hasn't been much in the way of domestic drivers to flag. NZ bonds held by foreigners fell to 60.7% in June from 61.5%.
  • Cash US tsys are 1-2bps richer in today’s Asia-Pac session, ahead of Retail Sales and Import/Export Prices data, and bank earnings.
  • Today’s move brings the cumulative post-RBNZ Decision rally to 27-35bps, with the 2/10 curve 8bps steeper.
  • It is also noteworthy that the NZGB 10-year yield finished at its lowest closing level this year at 4.37%.
  • On a relative basis, as well, the recent rally has been impressive, with the NZ-AU 10-year yield differential closing at +12bps, its lowest level since August 2022.
  • Tomorrow, the local calendar will see Q2 CPI. Bloomberg consensus expects headline to moderate to 0.5% q/q and 3.4% y/y from 0.6% and 4% in Q1, while the RBNZ forecast in May that it would ease to 3.6% y/y with a 0.6% quarterly rise.
  • The RBNZ will present revised forecasts at its August 14 meeting and the Q2 CPI will be important in determining if the target return is brought forward and thus also the first rate cut in the OCR profile.