NZGBS: Slightly Cheaper, US Curve Twist Steepens After Fed Chair Powell’s Remarks

In local morning trade, NZGBs are flat to 2bps cheaper after a twist-steepening of the US tsy curve in the NY session.

• The front-end US tsys were strongly bid after sanguine opening remarks from Fed Chair Powell in a speech to the Economic Club of New York. He noted that "Incoming data over recent months show ongoing progress toward both of our dual mandate goals—maximum employment and stable prices" and the significant tightening in financial conditions (which at the margin could mean less need to hike).
• The long end did, however, see significant cheapening impetus after Powell noted in the Q&A session that he didn’t know where policy would settle, that it does not feel too tight and that it’s possible the US is heading back towards a more inflationary environment.
• US tsys finished the NY session with yields 6ps lower to 12bps higher. The US 10-year yield traded at a fresh 16-year high of 4.99%.
• Swap rates are flat to 3bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is little changed across meetings, with terminal OCR expectations at 5.65%.
• NZ's trade deficit widened to NZ$2.33bn in September, with exports to China and Australia +8.9% m/m and +7.6% m/m respectively.