By Kymberly Martin
NZ swaps closed down 1-5bps yesterday.
Overnight, US 10-year yields pushed up to 2.62%.
The previous night’s soft GDT dairy auction may have tempted receivers back to the NZ market.
As NZ commodity prices slump while the NZD remains elevated the market may be pricing a more gradual OCR hiking path ahead.
NZ 2-year swap closed down 1bps at 4.22%, as 10-year closed down 3bps at 4.90%, resulting in further flattening of the 2-10s curve.
But the main focus of the day was the pricing of the new 2027 maturity NZ Government bond. It attracted strong demand with more than NZ$2.4b bids for the NZ$1-2b offer. The deal priced at the lower end of the price guidance range, at a 21bps spread to NZGB 2023s. The yields on NZGB 2023s closed down 2bps at 4.43%.
Overnight, US yields gapped higher in response to the upside surprise in the US ADP employment report.
US 2-year bond yields shot from 0.46% toward 0.49% while 10-year yields popped from 2.55% to sit above 2.61% this morning.
It is a quiet day on the domestic agenda today. Across the Tasman, today’s data highlight will be retail sales. Tonight it will be all eyes on US payrolls release. With expectations now likely quite high, a notable upside surprise may be required to boost US yields further.
In this context the ECB’s meeting tonight will be a bit of a sideshow. This is particularly true as it is not expected to announce any new policy measures after its ‘big reveal’ at its last meeting.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.