NZGBS: Closed On Cheaps, ~20% Chance Of A RBNZ Hike Next Wednesday

NZGBs closed at or near session cheaps, with benchmark yields 4-6bps higher. The local data docket was relatively light, with ANZ Consumer Confidence’s push to its highest reading since January 2022 as the highlight. Accordingly, domestic participants are likely to have been guided by spillover selling from US tsys and JGBs in Asia-Pac trade.

• US tsys have been pressured and sit at session lows, 2-3bps cheaper across the major benchmarks.
• 10-year and longer-dated JGBs have pushed to their highest levels in the current cycle. The 10-year yield reached a post-YCC tweak peak of 0.774%. In response to this development, the BOJ conducted an unscheduled bond purchase of Y300bn in 5-to-10-year notes at market yields. The announcement caused JGB futures to initially spike higher, but these gains were swiftly reversed.
• Swap rates are 4-9bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is little changed across meetings, with terminal OCR expectations at 5.77% (+27bps). The market currently attaches a 19% chance of a 25bp hike next week.
• Monday the local calendar sees the release of Building Permits for August, ahead of CoreLogic House Price Data and the RBNZ Policy Decision on Wednesday. Bloomberg consensus expects the OCR to be left unchanged at 5.50%.