NZGBs Little Changed Ahead Of Labour Market Report

NZGB yields are little changed vs. yesterday’s closing levels as participants await the domestic quarterly labour market report.

• There was a modest downtick in yields at the open, presumably linked to catch up re: trans-Tasman FI dynamics post-RBA, although the move was modest and has unwound.
• RBNZ dated OIS is little changed this morning, pricing 70bp of tightening for this month’s meeting and a peak OCR of ~5.20%.
• The latest RBNZ FSR has been released, with the Bank flagging house prices that remain above sustainable levels, an expected decline in residential construction (which will slow economic activity), heightened global economic risks and higher debt costs, which will weigh on consumption. The Bank also pointed to strong capital and liquidity positions at the country’s banks. No surprises on face value.
• In terms of the impending labour market report, the BBG survey points to a slowing of wage and employment growth in Q3, alongside a 0.1ppt downtick in the unemployment rate (to 3.2%) and a move higher in the participation rate. A firm enough labour market report could be seen as a rubber stamp for a 75bp hike at this month’s RBNZ meeting, although the release always presents the opportunity for some volatility (both in the figures and the markets).