NZGBS: Richer, Fedspeak Less Hawkish, RBNZ Decision Tomorrow

In early local trade, NZGBs are dealing 3-6bp richer with the 2/10 curve steeper. This comes after US tsys finished near their best levels of the NY session, with benchmark yields 1-12bp lower, ahead of US CPI data later this week and the start of the US earnings season. Headlines from Fed Daly, Mester and Barr leaned dovish to the side of balanced.

• Swap rates are 4bp lower with short-end implied swap spreads wider.
• NZ house-building costs are increasing at the slowest pace in almost three years as higher interest rates and a slowing economy curb demand for new homes. Construction costs rose 0.6% in the three months through June, matching the pace seen in the first quarter and the slowest since the fourth quarter of 2020. (See link)
• The local calendar is light again today, ahead of the RBNZ policy decision tomorrow. 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 closed little changed across meetings. A 13% chance of a 25bp hike is priced for this week’s policy meeting. Terminal OCR expectations are sitting at 5.80%.