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NZGBs Firmer On Global Catch Up, Local Risk Events Eyed

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A fairly parallel shift across the curve in early Tuesday trade, with the benchmark NZGBs running ~7bp richer as of typing as participants adjust to Monday’s general richening in core global FI markets.

  • The Gilt-driven move spilled over into U.S. Tsy trade, which then took the lead and held firm even as the long end of the Gilt curve faded later in the London day.
  • The latest NZIER QSBO has already crossed this morning and “suggests that businesses are still feeling downbeat in the September quarter, but they are also starting to see the light at the end of the tunnel.” The net percentage of firms expecting a deterioration in conditions of the coming month moved to 42% vs. the 62% observed in the previous quarterly survey. On the inflation front, 65% of firms expect to increase prices during Q4.
  • The RBA meeting provides the key regional event risk on Tuesday, ahead of Wednesday’s RBNZ decision, although the former will cross after NZGBs close, and will perhaps provide some impetus in pre-RBNZ trade on Wednesday.
  • As a reminder, OIS fully price a 50bp hike when it comes to Wednesday’s RBNZ, with universal expectations for such a move in the analytical community. Guidance from the Bank will be key, with OIS already pricing a peak rate (~4.80%) that is comfortably above the rate peak observed in the RBNZ’s most recently published OCR track.
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A fairly parallel shift across the curve in early Tuesday trade, with the benchmark NZGBs running ~7bp richer as of typing as participants adjust to Monday’s general richening in core global FI markets.

  • The Gilt-driven move spilled over into U.S. Tsy trade, which then took the lead and held firm even as the long end of the Gilt curve faded later in the London day.
  • The latest NZIER QSBO has already crossed this morning and “suggests that businesses are still feeling downbeat in the September quarter, but they are also starting to see the light at the end of the tunnel.” The net percentage of firms expecting a deterioration in conditions of the coming month moved to 42% vs. the 62% observed in the previous quarterly survey. On the inflation front, 65% of firms expect to increase prices during Q4.
  • The RBA meeting provides the key regional event risk on Tuesday, ahead of Wednesday’s RBNZ decision, although the former will cross after NZGBs close, and will perhaps provide some impetus in pre-RBNZ trade on Wednesday.
  • As a reminder, OIS fully price a 50bp hike when it comes to Wednesday’s RBNZ, with universal expectations for such a move in the analytical community. Guidance from the Bank will be key, with OIS already pricing a peak rate (~4.80%) that is comfortably above the rate peak observed in the RBNZ’s most recently published OCR track.