NZGBS: Little Changed After US Payrolls Exceed Expectations

In local morning trade, NZGBs are little changed. This comes after Friday’s release of the US nonfarm payrolls report, which surpassed expectations by a significant margin, with an impressive 336k jobs added in September. Moreover, the prior two months saw a substantial upward revision of 119k jobs. This unexpected data reignited speculation about a potential Federal Reserve rate hike in November, causing a predictable reaction in the financial markets, with US tsy yields sharply rising.

• However, other parts of the report were more mixed which helped alleviate Fed fears. Implied Fed funds edged up but the risks for a November move were still only about 30%, while chances for another tightening this year were only about 50%. That helped unwind the initial knee-jerk spikes in US tsy yields ahead of the Columbus Day long weekend. The 10-year finished 8bps cheaper at 4.80% after making a fresh cycle high of 4.885%.
• Swap rates are unchanged, with implied swap spreads slightly narrower.
• RBNZ dated OIS are unchanged for meetings out to July’24 but 2-4bps softer beyond.
• The data docket is relatively light this week, on Thursday, September Food Prices cross before Business NZ Mfg PMI and Card Spending round off the docket on Friday.