NZGBS: Closed Richer, Session Highs, Tracking Tsys

NZGBs closed 3bp richer, at local session highs, after an uneventful day for domestic news. Nevertheless, NZGBs have underperformed the $-bloc, with the NZ-US and NZ-AU 10-year yield differentials 1-2bp wider.

• US tsys have firmed in Asia-Pac trade, with cash tsys dealing 1-3bp richer across the major benchmarks.
• Swap rates are 1-2bp lower, with the 2s10s curve steeper.
• RBNZ dated OIS closed 1-2bp softer on the day for meetings beyond Apr’24. Nevertheless, pricing is 5-11bp firmer since the RBNZ decision on Wednesday. Terminal OCR expectations sit at 5.67%, just above the lower band of the 5.60-5.81% range it has traded in since the May Monetary Policy Statement.
• NZ’s central bank sees a risk that a strong housing recovery could keep inflation elevated for longer, underscoring policymakers’ decision this week to signal they’re in no rush to lower borrowing costs. “Near term, there are still some risks on the upside to inflation,” Assistant Governor Karen Silk said in an interview on Friday in Wellington. (See link)
• Next week the local calendar sees the July Trade Balance on Monday and Q2 Retail Sales Ex-Inflation on Wednesday.
• European CPI headlines later today.