NZGBS Slightly Cheaper Following Weakness In Europe

In local morning trade, NZGBs are slightly cheaper. It was a slow session overnight as the US was out, however there was some initial weakness in bond futures following a hawkish ECB sources report and decent size EUR & GBP bonds issuance.

• Bunds fell for a third day, the longest streak in more than three weeks, and swap spreads tighten as investors absorb €2b of 10-year ESM debt and prepare for upcoming bond offerings from Austria, Germany.
• This morning the NZGB curve has widened, yields are roughly 2.5bps cheaper, with the 2yr +2.4bps at 4.136%, while the 10yr is +2.6bps at 4.32%. The short-end has outperformed slightly with the yield of the 10yr now back at July 31st levels.
• New Zealand's terms of trade increased by 2.1% q/q in Q2, which was below economists' expectations of a 2.7% rise. Export volumes declined by 4.3%, a reversal from a 5.3% increase in Q1, while import volumes grew by 3.2%, up from a 1.9% rise in the previous quarter.
• New Zealand corporates are facing weak economic conditions, with consumer confidence hit by high inflation and interest rates. However, most corporate outlooks remain stable, with solid liquidity and cash flow-preservation measures supporting credit metrics, particularly in consumer-facing sectors. Key trends include soft discretionary spending, challenges in China's dairy market, rising office vacancies, and the growing importance of telecom mobile businesses, per S&P.
• Swap rates are little changed this morning
• Cross asset: The NZX50 is 0.10% lower, while the NZD edge lower overnight down the most vs the AUD.
• RBNZ dated OIS is pricing was steady on Monday, with 31bps of cuts priced in for the October meeting, and 72bps priced into year-end, pricing did soften about 5bps through to July next year.
• The data calendar is empty for the rest of the day, while we do have 98, 189 & 357-Day bill auctions later, and tomorrow we have ANZ Commodity Prices.