NZGBS: Risk Off Drives Yields Lower

In local morning trade, NZGBs are 6-8bps richer as risk aversion dominated US markets as they returned from the long Labor Day weekend.

• US tsy yields declined alongside lower US equities, with the 2-year yield reaching a low of 3.84%, before finishing 5bps lower at 3.86%. The yield curve flattened modestly with the 10-year yield down 7bps to 3.83%.
• Equities fell (Nasdaq futures -3.4% and -2.4% in S&P Eminis) with Nvidia down 9.50% after being subpoenaed by the DOJ. The SOX Index fell 7.75%.
• A weaker-than-expected ISM report added to growth worries and catalysed heavy profit-taking heading into Friday's key jobs report.
• The US ISM manufacturing index edged higher, to 47.2 in August. The headline index remains depressed after registering a fourth consecutive month in contractionary territory.
• Projected rate cut pricing through year-end firmed 1-2bps vs. Friday close levels: Sep'24 cumulative -35bps (-33bps), Nov'24 cumulative -68bps (-66bps), Dec'24 -102bps (-100bps)
• The major focus in the US this week is Nonfarm Payrolls on Friday. Later today the BoC rate decision will also be watched.
• Swap rates are 7-8bps lower.
• RBNZ-dated OIS pricing is richer across meetings. A cumulative 71bps of easing is priced by year-end.
• Today, the local calendar will see ANZ Commodity Prices.