NZGBS: Richer, US Tsy Yields Lower After Soft China Data & Bank Downgrades

In early local trade, NZGBs are 3-4bp richer after US tsys put in a strong performance. US tsys finished 1-7bp richer across benchmarks with the curve flatter. The solid bid for US tsys was sparked by another soft set of China trade data and a banking sector hit by Moody’s rating downgrades of 10 US small and medium-sized banks. Wall Street ended in the red but off early lows. Financials and materials underperformed.

• Fedspeak supported the US tsy rally too after Harker and Barkin indicated the FOMC could probably be patient, though more data will be needed to make sure.
• No significant reaction was noted from scant data, with more of the same Wednesday.
• Swap rates are 3-6bp lower, with the 3s10s curve flatter.
• RBNZ dated OIS pricing is little changed across meetings, with terminal OCR expectations at 5.65%.
• Today the local calendar sees July Retail Sales Spending data along with the RBNZ’s Survey of Inflation Expectations. A lift in hospitality spending is expected to offset weakness elsewhere, according to Westpac, while inflation expectations look set to ease now that headline inflation is well past its peak.