NZGBS: Little Changed, US Tsy Futures Softer After Debt Ceiling Deal

NZGBs opened little changed after US tsy futures opened with a slight decline in response to the news of a bipartisan debt ceiling agreement. The agreement entails the suspension of the debt limit for the next two years, while non-defence spending remains unchanged for the upcoming year (with a subsequent 1% increase in the second year). The announcement was made on Saturday.

• The real challenge lies ahead: garnering enough support from lawmakers on both sides of the political spectrum. According to The New York Times, Republican lawmakers have a track record of employing every possible means to hinder spending deals they oppose. They possess the necessary leverage to potentially derail the agreement since McCarthy's majority stands at a mere nine votes.
• Cash tsys are closed today for the Memorial Day holiday.
• The 2s10s US tsys curve twist flattened in NY trading ahead of the weekend after core PCE inflation was stronger than expected in April at 0.38% m/m (0.3% est.) following a stronger skew to Q1 revisions from Thursday’s quarterly data.
• Swap rates are unchanged.
• RBNZ dated OIS are flat to 3bp firmer across meetings.
• The antipodean calendar is light today, which will leave focus on broader risk appetite post the debt ceiling news as a key driver for NZGBs.