Richer, Spillover From NZGBs Ahead Of US CPI Data, Jobs Data Tomorrow

ACGBs (YM +9.0 & XM +7.5) are richer and near Sydney session highs.

• The local market saw a positive spillover from the RBNZ decision to cut its OCR by 25bps to 5.25%. Governor Orr said it was not a difficult decision as the RBNZ is now “confident” about inflation returning to target due to pricing behaviour adjusting to lower inflation and greater spare capacity. Also, a 50bp move was discussed. Future cuts will be data-dependent.
• July labour market data will print tomorrow, with Bloomberg consensus looking for a 20k increase in employment and a stable unemployment rate of 4.1%.
• We see risks to this outlook but not from the cycle but from seasonal patterns. If this occurs, then August is likely to show a rebound.
• The underemployment and youth unemployment rates plus hours worked are additional indicators monitored by the RBA monitors.
• Cash US tsys are flat to 1bp cheaper in today's Asia-Pac session ahead of US CPI data later today.
• Cash ACGBs are 7-9bps richer, with the AU-US 10-year yield differential at +8bps.
• Swap rates are 7-8bps lower.
• The bills strip has bull-flattened, with pricing +1 to +9.
• RBA-dated OIS pricing is 6-9bps softer for 2025 meetings. A cumulative 23bps of easing is priced by year-end.