NZGBS: Mixed After US Curve’s Twist Flattening, Light Calendar

In local morning trade, NZGBs are dealing mixed, with yield movements bounded by +/-1bp. The US tsy curve twist-flattened during the NY session, with yields 6bps higher to 6bps lower. US flash PMIs printed slightly better than expected, with both the manufacturing and services indices at or above 50. This, along with lacklustre demand metrics observed at the $51bn 2-year auction, appeared to pressure the short end of the US tsy curve.

• US equities posted decent gains and the USD strengthened after weak European PMI data. The data only served to highlight the gulf between the better-performing US economy and sluggish growth across Europe.
• Oil prices declined 2% as ongoing diplomatic measures and the freeing of some hostages delayed the much-feared Israeli ground assault on Gaza.
• The NZ-US 10-year yield differential is 2bps wider at +61bps.
• Swap rates are flat to 1bp lower.
• RBNZ dated OIS pricing is flat out to Jul’24 and 4-5bp softer beyond. Terminal OCR expectations are unchanged at 5.61%.
• While the local calendar is empty today, Australia sees Q3 CPI data. Bloomberg consensus is expecting a cooling in the headline and core CPI measures. The Trimmed Mean measure is forecast to fall to 5.0% y/y from 5.9% in Q2.