By Raiko Shareef
NZ interest rate rose yesterday, partly reflecting moves offshore, and exacerbated by one-way traffic in the local market.
The NZ swap curve opened 1 bp higher, thanks to the sell-off in US Treasuries on Monday night.
Local banks continue to clear mortgage-related flow, and in the absence of any resistance from receiving interest, interest rates drifted higher.
Swap rates closed up 3 bps for the day, with the 2-year rate at 4.22%.
Overnight, US Treasuries saw a bit of a rollercoaster ride in the wake of Fed Chair Yellen’s comments in her semi-annual testimony. The initial headlines looked like repetitions of well-known messages, disappointing expectations for a less dovish lilt.
But further into her hearing, the market read between the lines, and US Treasuries more-than-reversed an initial decline in yield to rise as high as 2.57% at the 10-year tenor.
That rise was pared as an equity market sell-off weighed, with the 10-year rate currently 1 bp higher for the day at 2.55%.
Today, NZ Q2 CPI will be the key release, with us and the market both expecting a rise to 1.8% y/y, from 1.5% previously. For what it’s worth, the RBNZ’s June projections show that they expect 1.7%, but we doubt that a minor miss either side would stop the Bank from hiking rates again in July.
Other news:
* German ZEW survey weaker than expected on both current situation and expectations measures.
* US retail sales +0.2% m/m vs +0.6% expected, but previous releases revised upward.
* US Empire manufacturing index at 25.6 vs 17.0 expected.
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