NZGBS: Richer, US Tsys Rally After CPI Miss

In local morning trade, NZGBs are 7-8bps richer after US tsys responded favourably to benign US CPI data. US tsys gapped richer on weaker-than-expected US CPI, curves bull steepened as rate cut pricing into year-end gained momentum.

• US CPI inflation for June undershot market expectations, with the headline CPI declining 0.1% m/m, taking the annual change down to +3.0% y/y and the core measure rising just 0.1% m/m, taking the annual increase down to 3.3% y/y, its lowest rate in more than three years.
• The 2-year finished 11bps lower at 4.51%, while the 10-year finished 7bps richer at 4.21% as the 4.19% resistance level stymied further gains.
• Fed's Goolsbee expressed confidence that the US economy is on track to achieve 2% inflation, where he described the recent data as "excellent". He noted that maintaining the current interest rate range effectively tightens economic conditions, as the economy is not overheating, he stopped short of mentioning when he expected a rate cut to come, as per BBG.
• NZ retail card spending fell 0.6% m/m in June versus a revised -1.2% in May.
• Swap rates are 4-7bps lower, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is 4-7bps softer for 2025 meetings. A cumulative 64bps of easing is priced by year-end.