NZGBS: Little Changed, Underperforming ACGBs After RBA Pause

In early local trade, NZGBs are unchanged with the markets subdued overnight due to the US holiday. US tsy futures are little changed from the NZ close.

• At yesterday’s local close, the RBA decided to leave the cash rate unchanged at 4.10%, in line with the small majority of economists. The market had been pricing in a 39% chance of a hike in the lead-up to the meeting. ACGBs were drifting cheaper into the decision so the immediate reaction was higher, but only some of those gains have been sustained. The NZ/AU 10-year yield differential sits +2bp versus yesterday’s close.
• Swap rates are flat to 1bp cheaper.
• RBNZ dated OIS pricing is unchanged across meetings out to November, but 4-9bp softer beyond.
• At the latest auction, whole milk powder prices experienced a decline, slipping by 0.4%. Additionally, butter prices saw a significant drop of 10%, and skim milk powder prices fell by 6%. As a result, the overall index recorded a decrease of 3.3%.
• Today the local calendar sees the release of ANZ Commodity Prices.
• The Asia-Pac calendar is also relatively light with Australia’s Judo Bank Services & Composite PMIs and China’s Caixin’s Services & Composite PMIs as the highlights.