Limited moves across global asset markets. The RBNZ’s decision to leave rates on hold at 5.5% and soften its hawkish bias sent bond yields and the NZD/USD sharply lower as the market priced out the residual risk the Bank would hike again

Global assets markets are little changed overnight in the absence of first tier economic data. Investors are looking ahead to key inflation data in the US and big European economies which could influence the expected path for interest rates. The S&P is marginally lower in early afternoon trade continuing the sideways price action from recent sessions. Global bond markets are stable while the US dollar advanced. Bitcoin surged above $60,000 for the first time since November 2021 extending gains to over 40% in 2024.

The second reading of US Q4 GDP revealed the economy grew slightly less than previously reported. Growth was revised to 3.2% compared to the initial estimate of 3.3%. Consumer spending advanced at an upwardly revised 3% rate. Meanwhile the core PCE price index increased 2.1%, up from the 2% in the advance estimate. The data suggests the US economy remains resilient against the higher interest rate backdrop.

There was limited market reaction the EU Commission’s economic sentiment index which unexpectedly weakened in February falling to 95.4 from 96.2 in January. The economic sentiment index combines consumer and business confidence and has been broadly stable at subdued levels in recent months.

Global bond markets were quiet. US treasury yields are marginally lower across the curve with the market continuing to consolidate near the yield highs for this year. 2-year treasuries are 4bps lower at 4.66% and 10-year yields are 2bps lower at 4.29%.

In currency markets, the US dollar is little changed against the major pairings but stronger against the broader G10 basket of currencies and particularly the NZD and AUD. EUR/USD dipped towards 1.08 in early European trade but recovered. After falling more than 1% following the RBNZ rates decision yesterday, NZD/USD extended the move lower in offshore trade reaching lows just above 0.6080. The NZD underperformed against the euro and yen but managed to stabilise against the AUD after the sharp fall yesterday.

NZ government bonds ended the local session sharply lower in yield following the RBNZ’s decision to leave rates on hold at 5.5% and soften its hawkish bias. The front end led the move lower as the market largely removed any residual risk the Bank would hike again. 2-year swap rates fell 17bps to 5.01%. The curve bull-steepened with 10-year rates dropping 9bps to 4.57%.

New Zealand Debt Management (NZDM) will offer NZ$500 million of nominal NZGBs in the weekly tender today split across 15 May 2028 ($300m), 14 Apr 2033 ($150m) and 15 May 2041 ($50m). NZDM announced yesterday that subject to market conditions, it expects a new 15 May 2035 nominal bond will be launched, via syndication, by the end of April 2024.

Australian bond futures are little changed overnight, suggesting limited directional bias for NZ yields on the open.

ANZ business confidence is released locally today, and retail sales in Australia are expected to rebound from unexpectedly weak sales in December. This evening, the focus will be on US PCE inflation for January. CPI and PPI surprised to the topside in January and the market will be monitoring the extent this impacts the Fed’s preferred core PCE measure. The median estimate is for a 0.4% m/m rise, which if realised, would be the largest monthly increase since January last year.