Bonds
Disappointing US home sales and mortgage data dampens growth forecasts
22nd Mar 12, 8:36am
by
by Mike Jones
It was a quiet day in NZ swaps. The second LGFA tender attracted strong demand. US yields declined overnight.
NZ swap yields closed little changed yesterday. The 2-year continues to consolidate its gains above the 3.0% level, now eyeing 3.20%. It closed at 3.13%. The 2s-10s curve sits just above 150bps.
NZ bond yields closed up 2-3bps across the curve. NZGBs had a small rally early on and then sold off heading into the Local Government Funding Agency (LGFA) tender. The tender attracted strong interest. The 85m of 15s saw a 2.3x bid-cover ratio and the 180m of 17s a 4.3x ratio.
The process of price discovery for this relatively new issuer continues, with the range of successful bids quite large. For the 15s the successful range was 3.96%-4.05%. The 15s and 17s now trade at around 78bps and 105bps respectively relative to NZGBs. At initial issue in February they traded at 77bps and 114bps respectively.
Overnight, US 10-year yields declined. Mortgage applications were weak and US existing home sales fell 0.9%m/m in February (+0.9% expected). The 10-year bond that had been clinging to its new highs around 2.38%, fell to trade around 2.29% currently.
We will likely see some flattening pressure on the NZ curve today. Given the moves seen overnight, NZ long-end yields will likely face downward pressure. Off-setting this will be a decent sized DMO bond tender today of 50m of 17s, 100mof 19s and 100m of 23s.
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