By Kymberly Martin
NZ swaps closed down 2-3bps. Overnight, US 10-year yields hugged closely to the 2.60% level.
In response to the deterioration of the situation in Ukraine over the weekend, NZ swaps opened down at the start of the week.
Yields closed down across the curve with a flattening bias.
The 2s10s curve finished the day at 116bps, the lowest level since June last year. NZ 2 and 5-year swap closed at 3.80% and 4.45% respectively.
Further strong domestic data in the form of NZ trade data went largely unnoticed.
The uncertainty of geopolitical events should keep some risk premium priced into NZ rates in the countdown to next Thursday’s RBNZ meeting.
Then the market will be looking to the Bank to provide some direction regarding the 100bps of OCR hikes that are currently priced by year-end. We continue to see 125bps of hikes over this period.
Overnight, attention remained on the Ukraine, but moves in US Treasuries were not dramatic. US 10-year yields bobbed around the 2.60% level, reluctant at this point to break below early February lows.
Today, ANZ commodity prices will be released domestically. The local focus however, will be the RBA meeting. The RBA is expected keep rates on hold at 2.50% today, following its recent move to a ‘neutral’ policy stance.
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