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NZGBS: Richer, US Tsys On Friday, New Government After Weekend’s Election


In local morning trade, NZGBs are 1-5bps richer after escalation fears of the Middle East conflict lent to the risk-off/safe haven bid in US rates early in NY's Friday session. US Tsys then pared gains briefly before rebounding slightly after the University of Michigan data came out mixed: Sentiment lower (63.0 vs. 67.0 est, 68.1 prior), Current Conditions (66.7 vs. 70.3 est, 71.4 prior), Expectations (60.7 vs. 65.7 est, 66.0 prior). Inflation expectations higher 1 Yr Inflation (3.8% vs. 3.2% est, 3.2% prior), 5-10Y (3.0% vs. 2.8% est, 2.8% prior).

  • Over the weekend, New Zealanders have chosen a centre-right government to manage mounting economic challenges, rejecting the left-leaning administration of Prime Minister Chris Hipkins. Christopher Luxon will become NZ’s new PM. (See link)
  • Swap rates are 4-5bps lower.
  • The Performance Services Index printed 50.7 in September from a revised 47.7 in August.
  • The local calendar is empty for the rest of the session ahead of Q3 CPI tomorrow. Bloomberg consensus expects +1.9% q/q and +5.9% y/y versus +1.1% and +6.0% in Q2.
  • Easing inflation may spur investors to dial back their expectations for another rate hike by the RBNZ. RBNZ dated OIS little changed today, with terminal OCR expectations at 5.70% (+20bps).

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