NZGBS: Unchanged, Fedspeak Push Back Against Early Cuts Continued, Trade Deficit Narrower

In local morning trade, NZGBs are little changed after US tsys bear-steepened, with yields 1-5bps higher across benchmarks. Fedspeak continued to push back against expectations for early and significant rate cuts next year.

• Fed Mester told the FT that the market had gotten “a little bit ahead” by pencilling in early interest rate cuts, “the next phase is … about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%”. Meanwhile, Fed Goolsbee told CNBC he was confused with the market’s reaction to the Fed’s policy update last week.
• US STIR pricing was little changed, with OIS showing 19bp of cumulative cuts for March and 142bp by end 2024.
• Oil also weighed on US tsys, with crude surging on Red Sea traffic disruption.
• Swap rates are 1-2bps higher, with implied swap spreads wider.
• RBNZ dated OIS pricing is slightly firmer across meetings. 99bp of easing is still priced for Nov’24.
• NZ’s trade deficit narrowed to NZ$1.234bn in November from a revised -NZ$1.730bn in October. The 12-month ytd trade deficit narrowed to NZ$13.874bn from a revised -NZ$14.823b in October.