JGBS: Futures Reverse Yesterday's Decline Overnight With US Tsys

There was a sharp narrowing in the Q2 YTD NZ current account deficit as a share of GDP with it printing at 3.7% after 4.2% and the peak in Q4 2022 of 9%. Q1 was revised sharply lower at $0.709bn (nsa) and 4.2% of GDP from $2.324bn and 5.7%. The deficit in Q2 widened marginally to $0.97bn (nsa) but seasonally adjusted it narrowed $0.7bn driven by a smaller primary income deficit.

NZ current account YTD % GDP

• The seasonally adjusted deficit at $3.45bn and the share of GDP at 3.7% were the lowest in four years.
• The goods and services deficit widened slightly to $818mn with exports outpacing imports up 9.8% y/y compared to 3.1% y/y. However, services imports rose 9.6% y/y with exports up 5.3%. Goods shipments were robust +11.7% y/y while imports rose only 0.5% y/y, showing weak discretionary spending.
• The goods deficit was little changed at $128mn while services widened to $690mn.
• The primary deficit narrowed by $1bn to $2.3bn due to New Zealanders earning more on overseas investments. Also companies with international subsidiaries earned more. 

NZ goods & services trade y/y%

Source: MNI - Market News/LSEG

In local morning trade, NZGBs are little changed despite a solid close for US tsys.

• The US short end continued to gain ground on the eve of the Fed decision, but notably, 10Y, 20Y, and 30Y US tsy yields were on course for their lowest close since April 4.
• US data is on the light side on Wednesday, leaving the stage clear for the FOMC decision and projections and Chair Powell's press conference.
• NZ's current account deficit was 3.7% of GDP in the 12 months through June, narrowing from a revised 4.2% in the 12 months through March. It was the smallest gap since 2Q 2021. Economists' median est. was 4.8% of GDP.
• Swap rates are unchanged.
• RBNZ dated OIS pricing is little changed across meetings. 23bps of easing is priced for October, with a cumulative 42bps by November 2025.
• The focus of the week will be on Thursday's Q2 GDP data release. Bloomberg consensus is in line with the RBNZ's August forecast of -0.3% q/q, bringing the annual rate to flat after declining 0.7% y/y in Q2. 25bp rate cuts are expected at both the October 8 and 26 November meetings.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond and NZ$225mn of the 4.25% May-34 bond.

• Bank of Korea to Sell KRWW1.5tn 3-Year Bonds
• Vietnam To Sell VND 9.0Tln 2035 Bonds; (TD2535028)
• Vietnam To Sell VND 1.0Tln 2030 Bonds; (TD2530010)
• Vietnam To Sell VND 3.0Tln 2040 Bonds; (TD2540037)
• Vietnam To Sell VND 0.5Tln 2055 Bonds; (TD2555052)
• Thailand to Sell THB20bn of 2045 Bonds
• Bank Indonesia to Sell 31D SUVBI Bills
• Bank Indonesia to Sell 276D SUVBI Bills
• Bank Indonesia to Sell 91D SUVBI Bills
• Bank Indonesia to Sell 367D SUVBI Bills
• Bank Indonesia to Sell 185D SUVBI Bills
• China to Sell CNY35bn 2045 Bonds
• China to Sell CNY20bn 28-Day Bills
• India to Sell INR100bn 91-Day Bills
• India to Sell INR60bn 182-Day Bills
• India to Sell INR50bn 364-Day Bills