NZGBS: Short-End Closed On A Negative Note, 10Y Weaker But Off Cheaps

Short-end NZGBs closed on a weak note with the 2-year benchmark yield 9bp cheaper. The 10-year benchmark was also 4bp weaker on the day but finished off session cheaps after this week’s supply saw solid demand for the Apr-37 line (cover ratio of 3.16x). The line was 2.0bp richer in post-auction trade. The bid was less enthusiastic for the May-28 and May-32 lines with cover ratios of 2.68x and 2.36x respectively. Nonetheless, the lines were 1-1.5bp lower in post-auction trading.

• In the absence of domestic data, the local market seems to have been affected negatively by the post-employment data reaction in ACGBs. Furthermore, given the somewhat concerning Q2 core CPI print from yesterday, there is a possibility of follow-through selling in the market.
• Swap rates are 5-8bphigher with the 2s10s curve flatter and implied long-end swap spreads wider.
• RBNZ dated OIS pricing is 1-5bp firmer across meetings beyond October. Terminal OCR expectations sit at 5.70%, the highest since early July.
• The local calendar has no data tomorrow with the next data release on note being Trade Balance data on Monday.
• Later today, the US calendar delivers Weekly Jobless Claims Data along with the July Philly Fed and June Existing Homes Sales.