By Kymberly Martin
NZ swap yields closed up 2bps across the curve yesterday, taking 2-year swaps back to 2.66%.
The 2s-10s curve remains at 105bps. The market now prices a 60% chance of a rate cut by mid next year.
There is little to challenge these expectations ahead of next week’s labour market data. Expect further consolidation today.
Yesterday’s bond tender attracted modest but sufficient demand with a 1.8x bid-to-cover ratio.
Bond yields closed little changed. NZ-US and NZ-AU 10-year yield spreads continue to sit close to the bottom of ranges providing potential for NZ bonds to sell-off on a relative basis.
Overnight, in the more positive equity market tone that prevailed, US Treasuries attempted to sell off. 10-year yields almost touched 1.74% before retuning to trade around 1.71%.
Tonight, all eyes will be on the US non-farm payrolls number. A 125k number is expected, up from 1114k last month.
If expectations are met or exceeded US long yields will likely move a higher.
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