NZGBS: Richer After Weaker Than Expected Labour Market Data

In local morning trade, NZGBs are 1-3bp richer (1-2bps richer on the day) after the Q3 employment report prints on the weak side of expectations. Employment was -0.2% q/q versus expectations of +0.4% and +1.0% in Q2. The unemployment rate came in line with expectations at 3.9% versus 3.6% prior. Private wages ex overtime undershot estimates printing +0.8% q/q versus +1.0% est. and +1.1% prior.

• The post-employment data richening has unwound the slight cheapening seen earlier in the session following the weak lead-in from US tsys. US tsys finished 3-5bps cheaper across benchmarks after the US employment cost index printed slightly stronger than expected. Month-end flows could also have contributed to the cheapening.
• Swap rates are 1-5bps lower after the data drop and 2-3bps lower on the day. Implied swap spreads are tighter, with the 2s10s steeper.
• RBNZ dated OIS pricing is 1-5bps softer across meetings after the data, with terminal OCR expectations 1bp lower at 5.60%.