NZGBS: Post-RBNZ Pause Rally Extends, US CPI Lower Than Expected

In early local trade, NZGBs are dealing 4-8bp richer after softer than expected US CPI data contributed to a large move lower in US tsy yields. US tsys finished the NY session 6-16bp richer across benchmarks, with the curve steeper. Today’s gain in NZGBs brings the post-RBNZ pause yield decline to 17bp for the 2-year and 11bp for the 10-year.

• US headline inflation declined from 4% to 3% in June, marking the slowest rate of inflation since March 2021. The market expected 3.1%. Core inflation also fell short of expectations, printing 4.8%. The decrease was primarily driven by softer airfare, hotel costs, and a decline in used vehicle prices. Notably, prices for core services ex-rent experienced a modest annualized growth rate of 2.9% during the three months leading up to June.
• Swap rates are 6-8bp lower with the 2s10s curve 2bp steeper.
• RBNZ dated OIS pricing is 1-8bp softer across meetings.
• Home sales fall 4.1% m/m (+14.6% y/y) in June, according to REINZ.
• Today the local calendar releases June readings for Manufacturing PMI, Food prices and Retail Card Spending data.
• Today the NZ Treasury plans to sell NZ$250mn of the 0.50% May-26 bond, NZ$150mn of the 1.50% May-31 bond and NZ$100mn of the 2.75% May-51 bond.