NZGBS: Sharply Cheaper After US Tsys React To Very Strong Payrolls Data

In local morning trade, NZGBs are 10bps cheaper after US tsy yields gap higher after a broadly higher than expected Change in Nonfarm of +353k vs +185k est. (prior up-revised to +333k from 216k), Private Payrolls surge to +317k vs +170k est. The Unemployment Rate was 3.7% vs 3.8% est., while the Labour Force Participation Rate was near steady at 62.5% vs 62.6% est.

• The 2-year US tsy yield shunted 16bps higher to 4.36%, the largest daily move since March 2023. 10-year yield increased 14bps to 4.02%, marking a sharp reversal from the 2024 low of 3.81%, seen in the lead-up to the FOMC.
• The tsy market now awaits this week’s supply. There is US$121bn of issuance across 3-,10-, and 30-year bonds.
• The large upside surprise to US payrolls pushed back the prospect of rate cuts by the Federal Reserve until later in the year—March's chance of a 25bp cut declines to 22% from 38% pre-data. May has a cumulative 23bps of easing, while June has a cumulative 45bps.
• Swap rates are 9bps higher.
• RBNZ dated OIS pricing is flat to 4bps firmer across meetings. A cumulative 91bps of easing is priced by year-end.
• Today, the local calendar sees ANZ Commodity Prices, ahead of 4Q Employment and Wages data on Wednesday.