NZGBS: Richer, Tracking Lower US Tsy Yields Ahead Of Weekend, Light Local Calendar

NZGBs are trading 5bp richer in early local trade after US tsy yields finished lower in trading ahead of the weekend. However, US tsys were well off their best levels after the bell. The rally received support from dovish comments by Fed Bostic, as well as, underwhelming PMI data, lower EGB yields and a decline on Wall Street.

• The long end outperformed, leading to a further inversion of the yield curve. The 2s10s curve finished at -102 after extending the inversion to -103.5 low vs. March's 40-year low of around -110.0.
• Preliminary Eurozone PMI data for June disappointed, with the Manufacturing, Services, and Composite indices all printing below market expectations. S&P Global US PMI data also came out lower than expected: Manufacturing PMI (46.3 vs. 48.5 est); Services PMI (54.1 vs. 54.0 est) Composite PMI (53.0 vs. 53.5 est).
• Cooler inflation metrics slightly tempered projected US rate hikes at one of the next three meetings, though Nov'23 implied rate is still fully pricing in a hike. The first full 25bp rate cut has been pushed out to May 2024.
• Swap rates are 4-5bp lower with the 2s10s curve steeper.
• RBNZ dated OIS is trading little changed with terminal OCR expectations at 5.65%.
• The antipodean calendar is light today.