By Kymberly Martin
It was an extremely quiet day in NZ markets ahead of the US payrolls release. There were no domestic data releases on Friday, so little to provide direction to the local market.
2 and 5-year swap were fairly static at 4.09% and 4.68% respectively. The 2-10s swap curve remains at 100bps. The market prices around 90bps of further rate hikes from the RBNZ, by year-end.
By contrast, the market sees less than a 30% chance that the RBA will raise the cash rate by 25bps by year-end.
On Friday night following the US payrolls release, US Treasury yields fell quite sharply.
It appears that heading into the number many investors had been building short positions on expectations the release could be as high as 210k.
On the release, there was therefore notable short-covering as investors returned to carry trades.
US 10-year yields closed the week at 2.72%, down from 2.80% just prior to the payrolls release.
This should apply some downward pressure to the longer-end of the NZ curve today, mimicking the moves seen in Aussie futures.
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