NZGBS: Richer With US Tsys After US Payrolls, RBNZ On Wednesday

In local morning trade, NZGBs are 4-5bps richer after a strong close to the week for US tsys following the release of weaker-than-expected US employment data.

• A small beat for NFP growth of 206k (cons 190k) but with a heavy downward revision to the previous two months. Two-month -111k, split evenly over May and April.
• The unemployment rate was higher than expected, increasing to 4.05% in June (cons 4.0 with some skew to a 3.9 print). The 4.1 rounding on screens exaggerated the increase, but it was another 0.1pp increase from 3.96% in May and 3.86% in April.
• Swap rates are 3-5bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is little changed across meetings. A cumulative 36bps of easing is priced by year-end.
• The local calendar is light until the RBNZ’s Policy Decision on Wednesday. Economists surveyed by Bloomberg unanimously expect a no-change decision. Most economists don’t expect the RBNZ to make any major changes to its hawkish commentary, despite signs of downside risks to growth. Net migration is also on Wednesday, with its release before the RBNZ decision.
• A majority of Shadow Board members recommended the RBNZ keep the OCR at 5.5% this week according to NZIER.