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NZGBS: Subdued Start After A Subdued Friday For US Tsys

BONDS

In early local trade, NZGBs are dealing unchanged after a quiet end to the week for US tsys, with no economic data or Fed speakers. There is no US economic data of note today either.

  • The US tsy 10-year yield fell 2bp to 4.25%, after reaching a high during the week of 4.34%. That high came within 1bp of the multi-year high set in October 2022.
  • Current market pricing regarding the near-term Federal Reserve policy remained relatively stable, indicating an anticipated cumulative tightening of 9bp over the upcoming two meetings. A contributing factor to the recent uptick in tsy yields stems from a decrease in the expectations for rate cuts in 2024. This shift is a response to the sustained strength demonstrated by the US economy.
  • Swap rates are 1bp lower.
  • RBNZ dated OIS pricing is little changed across meetings.
  • Today the local calendar sees the July Trade Balance, ahead of Q2 Retail Sales Ex-Inflation on Wednesday. Spending appetites likely remained subdued through the June quarter. The softness in retail spending reflects that high inflation and interest rate rises have squeezed households' purchasing power.
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