NZGBS: Richer, US Tsys Rally On CPI But Off Best Levels After FOMC

In local morning trade, NZGBs are 6bps richer after US tsys rallied on softer than expected US CPI data.

• Core inflation increased by 0.2% m/m, below expectations for a 0.3% gain. This took the annual core rate to 3.4%, the slowest pace in more than three years. Super core services inflation ex housing declined marginally and was the first negative reading since September 2021.
• US tsys however finished off their best levels after the June FOMC meeting was hawkish versus expectations. The new projection for the 2024 median Fed funds rate, showed just one cut anticipated by year-end, versus three in March’s projection (and versus 2 widely expected).
• But the reaction was relatively muted, due in part to the fact that the 2025-26 path was relatively steady, implying 100bp of cuts in each of 2025 and 2026 (vs 75bp for each year in the prior edition) to the same destination of 3.1%. (See MNI Fed Review here)
• Swap rates are 5-7bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is 2-3bps softer for 2025 meetings. A cumulative 26bps of easing is priced by year-end.
• Total Card Spending falls 0.9% m/m, -0.6% y/y, in May.
• Today, the NZ Treasury plans to sell NZ$250mn of the 3% Apr-29 bond, NZ$200mn of the 2% May-32 bond and NZ$50mn of the 2.75% Apr-37 bond.