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NZGBs Little Changed As Inflation Expectations Fall

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NZGBs are little changed today, earlier inflation expectation data showed a drop in both the 1yr and 2yr, while food prices increased in April to 0.6% from -0.5% in March. US Tsys futures are a touch higher, while the curve has steepened slightly. Elsewhere in the rates space JGB futures gapped lower on the BoJ bond buying announcement, which reduced purchases in the 5-10 year tenor compared to the late April buying op.

  • US Treasury futures have ticked up just a touch with the 10Y up (+ 01+) to 108-24, ranges have been tight while volumes have been on the lower side.
  • Earlier, the Performance Services Index fell to 47.1 from 47.2 the lowest since October 2022, Food prices rose 0.6% in April from a decline of -0.5% in March, and finally the 1-year inflation expectations eased to 2.73% from 3.22% in Q1 and the 2-year expectations eased to 2.33% from 2.50% in Q1.
  • NZGB yields erased the mornings moves higher to trade near best levels for the day now, with yields closing about 0.5bps richer.
  • Swap rates are 1-3bps lower. The NZD 2y OIS Swap has typically traded in line with the 2yr RBNZ inflation expectation but has broken that correlation over the past year. Chart 1
  • Source - BBG

  • RBNZ dated OIS is 2-3bps softer out past the August meeting with a cumulative 47bps of easing is priced by year-end
  • Looking Ahead: REINZ House Sales on Tuesday

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