NZGBS: Sharply Cheaper With US Tsys After Recession Fears Pared

In local morning trade, NZGBs are 5-6bps cheaper after US tsys bear-flattened following stronger-than-expected US retail sales and jobless claims data.

• July's advance retail sales report showed that the recent unexpected pickup in consumer momentum continues. June retail sales came in well above expectations at 1.0% M/M (0.4% expected, -0.2% prior rev from 0.0%).
• Initial jobless claims surprised lower for the second consecutive week with a seasonally adjusted 227k (cons 235k) in the week to Aug 10 after a marginally upward revised 234k (initial 233k).
• 2-year yields spiked 14bps to 4.09% as investors reduced expectations for aggressive easing by the Fed. 10-year yields rose 8bps to 3.91%.
• Swap rates are 5bps higher.
• RBNZ dated OIS pricing is 3-6bps firmer for meetings out to Apr-25. A cumulative 80bps of easing is priced by year-end.
• BusinessNZ Manufacturing PMI rose to 44 in July from a revised 41.2 in June. “Manufacturing activity will turn when the broader economy turns. Easing monetary conditions will help in this regard, but it will take time for the likes of a lower Official Cash Rate to generate a general pick up in sales”: BNZ
• PPI input and output prices rose 1.4% q/q and 1.1% q/q respectively in Q2.
• Today, the local calendar will also see Non-Resident Bond Holdings data.