BONDS: NZGBS: Stronger Despite Weaker US Tsys

In local morning trade, NZGBs are flat to 1bp cheaper after US tsys finished the NY session with modest gains.

• Overnight, the whole milk powder auction (held around 2 times per month) saw average prices rise 0.3% to $4036. Whole milk powder prices are up from recent lows but still around 7.7% off 2025 highs.
• The RBNZ meets today and is likely to cut rates 25bp to 3.0%, the mid-point of its estimated "neutral" range. While it paused at the July meeting, it was with a clear easing bias.
• With the cut widely forecast, attention will be on the revised RBNZ outlook and tone of the statement and press conference. The focus is likely to be on the projected OCR path and whether it is revised lower, suggesting further easing towards stimulatory territory as excess capacity persists. See MNI Preview here:
• Tomorrow, Governor Hawkesby will appear before a parliamentary committee to talk about the latest Monetary Policy Statement.
• Swap rates are unchanged.
• RBNZ dated OIS pricing is little changed across meetings. 22bps of easing is priced for today, with a cumulative 38bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.

Oil prices continued trending lower falling a percent as another step was made towards a Ukraine peace deal after the US and Europe agreed on security guarantees and the first steps were taken for Presidents Zelenskyy and Putin to meet. While a truce is a long way off, progress increases expectations that eventually sanctions on Russia will be eased. A setback could see the recent sell off reverse.

• WTI was down 1.4% to $62.51/bbl to be almost 10% lower in August. It reached a low of $62.25, above support at $61.29. Key resistance is at $69.36. It is currently around $62.60.
• Brent fell 1% to $65.95/bbl off the intraday low of $65.61, holding above initial support at $65.01, 13 August low. A clear break of this level would confirm the resumption of the bear leg. Key resistance is at $72.83. The benchmark is down 8% this month.
• The US threatened to increase tariffs on countries who buy Russian crude if there isn’t a peace deal. President Trump announced an extra 25% on India and that China could be next but then he met with Putin. On Tuesday, Treasury Secretary Bessent said that India could still face that punitive tariff.
• Bloomberg reported that there was a US crude inventory draw of 2.4mn barrels last week, more than offsetting last week’s 1.5mn build. Gasoline stocks fell 1mn barrels but distillate rose 500k, according to people familiar with the API data. The official EIA data is out on Wednesday.

• China releases the decision on their Loan Prime Rates today with expectations being that no change is likely.
• The Loan Prime Rate (LPR) is based on a weighted average of lending rates from 18 commercial banks, which will submit their LPR quotations, based on what they have bid for PBOC liquidity in open market operations, to the national interbank funding centre before 9am on the 20th of every month.
• The PBOC kept key lending rates at record lows during the July fixing, in line with our expectations.
• The decision to hold was made amidst mounting signs of moderating growth under the threat of potentially high US tariffs.
• The one-year loan prime rate (LPR)—the benchmark for most corporate and household loans—was held steady at 3.0%, while the five-year LPR, which guides mortgage rates, remained unchanged at 3.5%.
• Data released last week showed a slowing in retail sales, industrial production as well as the ongoing decline in property prices.