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NZGBs Richer In Earlier Trading, WBC Sees Cuts In Feb, US CPI Tonight

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In local morning trading, NZGBs are 1-3bps richer and the curve has bull-flattened. WBC says RBNZ to start cutting in Feb 2025 and there is no data out in NZ today with the market focused on US CPI with consensus at 3.4% y/y down from 3.5% y/y in March

  • US treasury futures gapped lower initial as US PPI was released overnight, before a deeper look into the numbers caused a quick reversal with the 10Y contract trading back above 109-00, while yields closed the session 4-5.5bps lower
  • The NZGB curve is bull-flattening this morning with the 2Y -1.6bps at 4.734%, 10Y is -2.6bps at 4.646% and just off monthly lows of 4.638%
  • Westpac economists predict that the RBNZ will begin lowering interest rates in February 2025, anticipating that inflation will remain above 2%. They forecast inflation to decline to 2.3% in the second quarter of 2025 and 2.2% by the fourth quarter.
  • Swap rates are 0.5bp to 1.5bps lower
  • RBNZ dated OIS is unchanged this morning, with a cumulative 46bps of easing is priced by year-end
  • Looking Ahead: empty calendar on Wednesday with PPI input/output on Friday

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