NZGBS: Richer As Haven Sentiment Grips Markets

In local morning trade, NZGBs are 5-7bps richer after haven sentiment gripped markets on Monday following the surprise attack by Hamas against Israel over the weekend. However, activity was tempered by the partial absence of US market participants due to the Columbus Day Holiday.

• US Tsy futures extended session highs in late trade (TYZ3: 107-30+ high, +1-00 on light volume (775k) after balanced comments from Fed Vice Chair Philip Jefferson emphasising both the threat of more persistent inflation than expected as well as the possibility of a sharper growth slowdown than is currently on investors’ radar. “I am particularly attentive to upside risks to inflation, such as those associated with the economy and labour market remaining too strong to achieve further disinflation, as well as risks associated with unexpected increases in energy prices,” said Jefferson.
• Crude prices remained well bid, with WTI +3.59 at 86.38.
• Swap rates are 5-7bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is 1-5bps softer across meetings, with Jul'24 leading. Terminal OCR expectations soften to 3.70% from 3.73%.
• Today, the local calendar is empty, ahead of Net Migration tomorrow, Food Prices on Thursday and Business NZ Mfg PMI and Card Spending on Friday.