By Kymberly Martin
NZ swaps have saw-toothed their way to slightly higher levels in recent days. On Friday, swaps closed up 3-5bp across the curve.
NZ 2-year swap closed up 3bps at 3.86%, slightly below early year highs and our calculation of ‘fair value’ (around 4.00%). This is based on our view the RBNZ will raise the OCR from its next meeting (March 13) to be 200bps higher by the end of 2015. NZ 5-year swap also closed 4bps higher at 4.58%. The 2-10s curve sits at 123bps, a little off its early February lows.
NZ 10-year bond yields, that dipped as low as 4.50% mid last week, ended the week at 4.54%.
Yields are close to the bottom of the 4.50-5.00% range we see for the year ahead. They are also approaching the bottom of expected ranges with AU and US equivalents. However, we would not ye be aggressive sellers, given still limited NZGB supply in the weeks ahead.
Friday night was all about US payrolls data. On the headline release US 10-year yields initially gapped from 2.72% to around 2.63%.
However, as the market absorbed the details of the report, and realised it was not as weak as the headline payrolls number, yields crept back up to 2.68%.
It’s a low key week ahead on the domestic front. Look out for the separate QV and REINZ housing reports for January, due at some stage this week.
There are no key data releases scheduled offshore tonight, though tomorrow night new Fed Chair, Yellen, delivers her inaugural monetary policy report to the house.
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