NZGBS: CPI On Deck

Monday’s global rally in core FI markets, centred on UK fiscal developments, has provided a mild bid for NZGBs, which sit 2-3bp richer across the curve this morning. Still, it is worth noting that U.S. Tsys pulled back from firmest levels as we moved through NY hours, which may be limiting the bid in NZGBs. Although, the proximity to the Q3 CPI reading, due in ~15 minutes, is the major limiting factor for price action.

• BBG consensus looks for headline CPI to slow to +6.5% Y/Y & +1.5% Q/Q in Q3, from +7.3% & +1.7%, respectively. On the other hand, non-tradable inflation is expected to accelerate to +1.8% Q/Q vs. the 1.4% seen in Q2. Most of the sell-side seem to be more wary of the risk an upside surprise vs. consensus than a downside miss.
• The RBNZ will also release its own sectoral factor inflation model later in the day, which stood at +4.8% Y/Y in Q2.
• RBNZ dated OIS currently prices ~61bp of tightening for the final RBNZ meeting of ’22, along with a terminal rate of just over 5.00%, little changed vs. levels seen late on Monday.
• 2-Year swaps are showing back below 5.00%, just, after registering a fresh cycle high on Monday.
• Elsewhere, any trans-Tasman impulse from the minutes covering the most recent RBA monetary policy decision and an address from RBA Deputy Governor Bullock will be eyed.