By Kymberly Martin
NZ swaps slipped a little further yesterday. Despite the difficulty in interpreting yesterday’s HLFS, the market responded to the cautious labour market message the data portrayed.
Swap yields closed down 4-5bps across the curve.
The market has pared back its OCR expectations to just a 30% chance of a hike in the year ahead. We continue to expect a 25bps hike in December.
In the near-term however, yields may be set for a more protracted pull-back. There is little data on the horizon domestically likely to surprise to the upside.
In addition, offshore long yields (US) look set for a period of consolidation/pullback. We like receiving swap at current levels given the positive carry and roll.
However, we would see any significant pullback in yield as an opportunity to increase hedging against expected future rate rises.
Yesterday’s inaugural DMO inflation-indexed bond auction attracted no shortage of bidders, with a 6.5x bid-to-cover ratio. Many of the bids were ‘flyers’. But successful bids for the $200m offered, came around market pricing at time, suggesting genuine demand.
Overnight, the ECB left rates unchanged as expected. The Bank of England left its Bank Rate at 0.5% and asset purchases at £375 as expected.
Spain managed to exceed its maximum borrowing target (€4.5b) in auctioning bonds overnight. However, given recent political concerns engulfing the sovereign it had to pay higher yields that at its last auction in January.
Global ‘safe haven’ bonds attracted fairly steady demand overnight, with the yield on US and German bonds slipping. US 10-year yields sit close to 1.94% this morning.
There are no local data releases today.
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5 Comments
All IS WELL !!!! http://www.theburningplatform.com/?p=48126
Inquiring minds might wonder how auto sales could be booming when there are 4 million less employed Americans and real wages are falling. Of course, mainstream media faux journalists aren’t paid to inquire, think critically, or even think at all. They are paid to regurgitate propaganda designed to keep the masses sedated and ignorant. The “fabulous” rebound in auto sales has been buoyed by the return of easy money lending, even to deadbeat borrowers with lousy credit histories. There is a reason the Federal government hasn’t attempted to spin off their 80% control of Ally Financial (aka GMAC, Ditech, Rescap). The Feds are attempting to manufacture a recovery by doling out subprime auto loans to anyone who can scratch an X on a loan document and offering 0% loans over 7 years to good credits. How exactly does a finance company generate a profit by making 0% loans for seven years and approving loans to people with no means of paying them back? Experian recently noted that 44% of ALL auto loans have been to subprime borrowers over the last year. When a financing company doesn’t have to worry about profits or loan losses, everyone gets a Cadillac Escalade. The losses on these subprime loans will be in the billions when the next leg down in this Crisis hits. The taxpayer will unknowingly pick up the tab, just as they have been doing for the last five years. The trend in this chart is nothing but a Federal government induced fraud.
Interesting comment about booming car sales in the US when buyers are offered 0% 7 year loans. - can that be the case in NZ?
Strong sales of both new cars and new commercial vehicles pushes total to over 100,000 for year, third highest on record
Preliminary industry registration data shows total new vehicle sales for 2012 topped 100,000 units, claimed the Motor Industry Association.
"The 19.0 % increase in overall sales was an outstanding result in an apparently depressed economy. We are delighted with this result", said Perry Kerr, the associations chief executive. Read article
Or is this a case of local motor vehicle manufacturers financing channel stuffing through regional outlets?
Ummm , maybe auto sales are booming in the US because Barack Obama borrowed Tony Abbott's " decentralization " idea , and put all the food stamp outlets and the soup kitchens in the desert ?
.... so the poor folks gotta get in their SUV's and Hummers , and drive there ....
Obama just borrows full stop - the cause seems to be immaterial.
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