NZGBS: Richer, US Tsys Reverse Post-FOMC Cheapening

In local morning trade, NZGBs are 3-4bps richer after US tsys recovered from their post-FOMC sell-off following yesterday's softer PPI and higher weekly claims. It rekindled 50bps in rate cut pricing by year-end.

• PPI final demand printed lower than expected at -0.2% vs. 0.1% m/m (2.2% y/y vs. 2.5% est), Ex Food and Energy m/m 0.0% vs. 0.3% est, (y/y 2.3% vs. 2.5%). Meanwhile, weekly jobless claims were higher than expected at 242k vs. 225k est, continuing claims 1.82m vs. 1.795M.
• US tsys also received a boost from a strong $22bn 30Y auction reopening. It stopped 1.6bp through: 4.403% high yield vs. 4.419% WI; 2.49x bid-to-cover vs. 2.41x in the prior month.
• 2- and 10-year US tsy yields finished 5bps and 7bps lower, which took them back to, or below, the levels before the FOMC Decision, which was interpreted as more hawkish than expected.
• NZ’s manufacturing PMI fell to 47.2 in May from a revised 48.8 in April.
• Food Price data showed -0.2% m/m in May. Rent +0.3% m/m.
• Swap rates are 4-5bps lower.
• RBNZ dated OIS pricing is 2-4bps softer for 2025 meetings. A cumulative 29bps of easing is priced by year-end.