RBNZ: Timing Of More Hikes Uncertain As MPC Focuses On Economic Impact

JGB futures are holding weaker, last 126.68, -.39 versus settlement for the Sep future. This keeps the downtrend firmly intact from a technical standpoint, with the market happy to fade upticks. Cash JGB yields are firmer, led by the front to mid part of the curve, around 2-4bps higher. The 40yr yield is down around 3bps. News flow has been dominated by FX intervention headlines and further surges in the yen. Still, focus is shifting to whether urgency around shifting the weaker yen trend will extend to earlier BOJ rate hikes. OIS markets now see close to  46% chance of a Sep 25bps rate hike, slightly up on Friday's 41% level (which rose post the BoJ). 

• The 10yr yield is edging up, last +2bps to 2.825%. 1-4yr tenors are 2-4bps higher, with the 2yr yield printing fresh highs since 1995 in the first part of trade. The 405 is off 3bps to 4.01%. The 2/30s curve is flatter to 244.5bps, off recent highs off +250bps. The more hawkish BoJ bias likely aiding recent moves.
• Looking ahead, on Wednesday we get June labour cash earnings. Tomorrow delivers 10yr supply as well.

Aussie bond futures have held softer today, but ranges have been fairly tight with Sydney out due to the bank holiday. 10yr futures were last 94.985, down 5.5bps. The range so far today has been 94.965-95.04. For the 3yr we were last around 95.47/48, off 3.5bps (with a 95.45-95.51 range so far today). Like elsewhere, this keeps recent ranges for futures intact. The sharp dip in oil futures/higher UST futures backdrop, likely helping contain downside so far today. 

• July’s Melbourne Institute inflation gauge signals that the moderation in price pressures may have stalled at the start of Q3. The gauge rose 1.0% m/m bringing the annual rate to 4.0% after June’s 3.9%, which had been the lowest since the onset of the Iran War.
• Looking ahead, ANZ job ads for July are released on Tuesday. Vacancies have been trending lower since the start of the Iran War as heightened uncertainty and elevated fuel prices weigh on hiring plans.

NZGB yields are holding firmer as Monday trade unfolds, the benchmarks around 4.5-6bps firmer in yield terms (with the back end slightly outperforming). The 2yr is back near 3.65%, while the 10yr is just above 4.73%. This keeps yields within late July ranges, and while today's move largely ignores the weakness in UST yields seen so far today (as lower oil prices has helped reverse Friday's gains). The NZ-US 10spread has rebounded back above flat to be +4bps currently. We are still under late July highs in the +10-15bps region. Australian bond markets have been quiet today as well, with Sydney out due the bank holiday. 

• RBNZ pricing is little changed so far today, with OIS markets pricing in around a 94% chance of a further 25bps hike at the Sep policy meeting.
• Earlier we had June building permits data, which remained soft, with a further 3.6% fall, after a revised 4.9% fall in May.
• Most focus will be on Wednesday's Q2 jobs data though. Q2 filled jobs and Bloomberg consensus suggest that employment may record the fourth consecutive quarter of growth but it’s still likely to be muted with only a 0.1% q/q increase expected. The unemployment rate is forecast to rise 0.1pp to 5.4%. This is consistent with ongoing excess capacity in NZ which is helping to limit firms’ pricing power and workers’ wage demands. Q2 private wage growth is forecast to rise 0.6% q/q.