By Kymberly Martin
Trading in NZ markets was interrupted on Friday afternoon by the earthquake that struck central NZ, rattling Wellington. Swaps closed down 6-8bps on the day.
However, yields were still higher on the week, and the curve much steeper. 2-year swap closed 2bps higher on the week at 3.46% while 10-year was 16bps higher at 4.94%. The 2-10s curve steepened to its highest point since April 2012, At 149bps.
NZ 10-year bond yields closed little changed on the day, but a massive 27bps higher on the week. Yields are at their highest level since October 2011.
On Friday night, offshore yields showed little response to US data releases. Both US and German yields traded very tight ranges for most of the night.
However, early on Saturday morning, US 10-year yields pushed on up to new highs, touching 2.86% before closed at 2.83%. This is now their highest level since July 2011.
Today the NZ Performance of Services Index (PSI) will be released. We expect a strong reading, though it would be doing well to equal the stellar reading from the PMI last week (59.5).
Otherwise NZ data is of relative 2nd tier importance this week, although tomorrow’s survey of 2-year-ahead inflation expectations will be of interest. Expectations have been trending down since mid-2011 and at 2.1% now sit close to the RBNZ’s central target.
Offshore it is also a relatively thin week for data. However, tomorrow’s RBA Minutes and Wednesday night’s US Fed Minutes will be highlights for rates markets. .
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