NZGBS: Richer After US Payrolls Slightly Disappoint, RBNZ Decision On Wednesday

In early local trade, NZGBs are dealing 2-3bp cheaper with the NZ/US 10-year yield differential 6bp tighter at +76bp. US tsys finished trading ahead of the weekend mixed. Non-farm payrolls increased 209k which was marginally less than the 225k expected but there were large downward revisions of 110k to previous months. US tsys gapped higher initially after the data dropped but reversed support as attention turned to the unemployment rate falling back to 3.6%, from 3.7% in May, and wage growth printing stronger than expected, rising 4.4% on an annual basis.

• Swap rates are 2bp higher with implied swap spreads little changed.
• The local calendar has no data today with Retail Card Spending delayed until July 13.
• The week’s highlight undoubtedly is the RBNZ’s policy decision on Wednesday. BBG consensus is unanimous in expecting a no-change outcome after the RBNZ steered the market in its May Monetary Policy Statement that it expected that no further increases in the OCR would be required.
• RBNZ dated OIS pricing is little changed across meetings. A 16% chance of a 25bp hike is priced for Wednesday’s policy meeting. Terminal OCR expectations are holding at 5.82% after shunting 14bp firmer on Friday.