By Kymberly Martin
Despite offshore ructions the previous night, NZ markets traded fairly quietly yesterday.
Swap and bond yields closed virtually unchanged. 2-year swap sits at 2.86%. 10-year bond yields sit at 3.29%.
Heading into today’s CPI release the market continues to prices around a 40% chance of a rate hike from the RBNZ in the year ahead. In line with the market we expect a 0.9%y/y CPI outcome.
Despite being at the bottom of the RBNZ’s target range, we (and the RBNZ) continue to see inflation picking up into year-end and next, necessitating rate hikes in 2014.
Overnight, in the backdrop of a rebound in US equity markets, US 10-year bond yields have clawed their way back to 1.72%.
German equivalents also tracked higher from 1.25% to 1.28% despite a German ZEW survey of the economy that came in slightly below published expectations.
Tonight, central banks will be back in the spotlight with the release of BoE Minutes and the Bank of Canada announcing rates.
Our UK economists expect the BoE Minutes to show Governor King was once again outvoted 6-3 in his desire to increase asset purchases.
A 5-4 vote would indicate the committee are ready to move in May once the Inflation Report forecast is completed.
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