NZGBS: Closed On A Weak Note, Budget In Focus, Implied Swap Spreads Tighter

NZGBs closed on a weak note, with benchmark yields 9-10bp higher. A thin local data docket has left local participants on headlines and US tsys watch.

• Economic activity is slowing, broadly as anticipated in the Budget, with indicators of activity in July pointing to a sluggish start to the Q3, the Treasury Dept. says in Fortnightly Economic Update published Tuesday in Wellington. (See link)
• The RBNZ reports variation to the 2020-2025 funding agreement. Variation is to provide the additional funding required by the RBNZ to implement the new regulatory and supervisory regime under the recently enacted Deposit Takers Act. (See link)
• US tsys have ticked away from Asia-Pac session lows, with little macro newsflow crossing. US tsys are little changed across the major benchmarks.
• Swap rates are 5-7bp higher, with implied swap spreads 4bp narrower.
• RBNZ dated OIS 1-4bp firmer for meetings beyond Feb'24, with terminal OCR expectations at 5.71%.
• Tomorrow the local calendar sees 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.