NZGBS: Richer Despite Cheaper US Tsys

In local morning trade, NZGBs are 2-4bps richer, with the 2/10 curve steeper, despite US tsys reacting negatively to jobless claims, which came out lower than anticipated. The US 10-year yield returned to around 4%, 4bps higher on the day. The US 2-year finished 8bps cheaper at 4.04%.

• US initial jobless claims fell 17k last week to 233k, a larger drop than the market expected while continuing claims were in line at 1875k. However, the data did at least rule out a further deterioration in the labour market.
• The resilience in NZGBs today likely reflects a dovish sentiment that was ushered in yesterday via the RBNZ’s inflation expectations data.
• As a result, the NZ-US 10-year yield differential has narrowed by 9bps from yesterday’s close to +28bps.
• Swap rates are 2-4bps lower, with the 2s10s curve steeper at +3bps. The 2s10s curve moved into positive territory yesterday for the first time since July 2022.
• RBNZ dated OIS pricing is little changed across meetings. The market attaches a 69% chance of a 25bp cut in August versus 43% before yesterday’s RBNZ inflation expectations data. A cumulative 90bps of easing is priced by year-end.
• Today, the local calendar is empty.