By Kymberly Martin
NZ markets were extremely quiet yesterday, ahead of this week’s major labour market data.
We are wary of some softer looking filled jobs and especially paid hours data from the Quarterly Employment Survey, following their strong readings in Q2.
This may cause the market to increase RBNZ rate cut expectations as we head into Thursday’s HLFS employment data.
There was a general tone of caution in markets leading up to tonight’s US election in the backdrop of ongoing Greek bailout negotiations.
There was solid demand for German and US ‘safe haven’ bonds.
German 10-year bond yields paddled sideways around 1.43% while US equivalents slipped to 1.69%. Key resistance for US bonds is seen when yields reach 1.60%.
Today the RBA meets. It is a close call and the market currently prices a 55% chance of a 25bps cut.
Irrespective of whether a cut is delivered, our NAB colleagues see the RBA cash rate 25bps lower, at 3.0%, by February next year.
Further out we see RBNZ and RBA target rates converging. On our forecasts the RBNZ gets underway with rate hikes while the RBA remains on hold.
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