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Offshore investors remain sceptical about how much further the RBNZ’s hiking cycle can go in the near-term

Bonds
Offshore investors remain sceptical about how much further the RBNZ’s hiking cycle can go in the near-term

By Raiko Shareef

NZ swaps finished the day slightly lower on Tuesday, after a fairly active session.

The 2-year swap traded in the widest range since mid-July.

Swap yields opened higher, as local names looked to make use of the pull-back in rates seen over the past month or so.

But as the session wore on, receiving interest reversed these gains, with the 2-year swap closing 1 bp lower at 4.08%.

It seems as though offshore investors remain sceptical about how much further the RBNZ’s hiking cycle can go in the near-term, and anticipate some further declines in short-end interest rates.

Offshore, last night saw a notable rally in European bonds, with Germany’s 10-year yield dropping 3 bps to 1.12%.

These are even lower levels than seen at the depths of the European debt crisis.

UK bond yields also fell by 3 bps, helped by dovish comments from BoE Deputy Governor Broadbent. Nervousness regarding the EU’s harder stance on Russia is a likely contributor to the appeal of bonds.

US bonds followed their trans-Atlantic peers, with the 10-year Treasury yield down by 3bps to 2.46%.

Tonight marks the start of the week’s main events, all from the US. First off the rank is the ADP private payrolls data, followed by the advance reading of Q2 GDP, and then capped by the FOMC statement to be released in the early hours of the NZ morning.

 

Daily swap rates

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Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA

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1 Comments

Bank economists were predicting an OCR of 4.5, supposedly "neutral", by early 2015. 

That was obvious to all that was never going to happen, given the fragile state of our 'recovery'. 

 

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