by Kymberly Martin

NZ swap and bond yields opened under downward pressure, continuing to drift lower on the day. Overnight, 'safe haven' US and German yields declined toward all-time lows.

Following on from offshore moves, NZ yields declined yesterday with a flattening bias in the swaps curve. 10-year swap yields fell 7bps to 4.10%, still some way above their mid December lows. 2-year swap yields declined 4bps to 2.76%.

In NZ bond markets, yields closed down 3-4bps, with the yield on 21s at 3.84%. However, similar sized downward moves in US and AU 10-year yields over the past 24-hours have kept spreads quite constant. 10-year yields in all three countries now sit within 13bps of their lows.

'Safe haven' German 10-year yields declined from around 1.84% to 1.79% last night.

The market absorbed the positive news of progress toward long-term sustainability for the Eurozone, with agreement in key steps toward a deficit control treaty.

However, the market still sought refuge from concerns in the near-term, due to lack of resolution in the Greek negotiations. Peripheral bond spreads did manage to narrow somewhat, with the Italian-German 10-year bond spread declining more than 10bps.

In the day ahead there are no NZ data releases. PMI data for China, Europe and the US will be released.

Analyst expectations are for China to struggle to maintain a level above 50 (expansion), but for European and US releases to move up, above, or at least toward 50. Any upside surprises could see some of the downward pressure come off global long yields. This, in turn, could give some boost to NZ long yields.