By Kymberly Martin
The NZ swap curve steepened yesterday.
Overnight, US 10-year yields spiked higher on a stronger than expected US payrolls report.
It was a relatively volatile day in NZ swaps.
Yields opened higher on the back of the previous night’s US ADP report. However, yields dipped later in the day after fairly dovish comments from RBA Governor Stevens, followed by a weak AU retail sales number for May (-0.5% vs. 0.0% expected).
Stevens said the “RBA still has ammunition on interest rates”. The market has increased its expectations for a 25 bps rate cut from the RBA, to 60%.
AU yields closed down across the board. AU 3-year swap briefly dipped below 2.82%, its lowest level since last August.
NZ 2-year swap closed down 1bps at 4.22%. 10-year closed up 2bps at 4.93%.
Following the positive surprise on US payrolls last night, US 10-year yields gapped from 2.63% to above 2.68% before drifting back down to 2.64% early this morning.
US 2-year bond yields gapped from 0.48% to above 0.52% and now sit at 0.51%. This is their highest level since a spike higher early last September.
Meanwhile the ECB offered no surprises last night, leaving policy unchanged.
Today, NZ yields will likely open a little higher after the offshore moves, but generally it should be a quiet end to the week. There are no local data scheduled and the US celebrates Independence Day tonight.
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