NZGBS: Closed On A Weak, $-Bloc Bonds Pressured By China’s Unchanged 5Y LPR

NZGBs closed on a weak note, with benchmark yields finishing 2bp higher.

• $-bloc bonds US tsys have been pressured on Monday after China held the 5-Year LPR steady at 4.20%, a cut of 15bp had been expected. The 1-Year LPR was cut 10 bp when a cut of 15bp was expected.
• Swap rates closed flat to 1bp higher, with the implied long-end swap spread narrower.
• RBNZ dated OIS pricing closed 1-5bp firmer for meetings beyond November. Terminal OCR expectations nudged higher to 5.70%.
• NZ’s trade deficit widened to NZ$1.11bn in July. Exports to China and Australia declined respectively by 18.1% m/m (-24% y/y) and 9.4% m/m (+8.9% y/y). Dairy product exports fell 19% to NZ$1.48bn in July.
• Bloomberg reports that Westpac NZ economists expect the Treasury’s pre-election economic and fiscal update will project a wider budget deficit in the year through June 2024. They expect the 2023-24 forecast deficit to widen by NZ$4-5bn, with the 2023-24 borrowing program rising by ~NZ$6bn. (See link).
• Tomorrow the local calendar is empty, ahead of Q2 Retail Sales Ex-Inflation on Wednesday. Spending appetites likely remained subdued through the June quarter. The softness in retail spending reflects that high inflation and interest rate rises have squeezed households' purchasing power.