By Kymberly Martin
There was very little action in NZ markets ahead of Friday night’s US payrolls release.
After the release US 10-year yields dropped from 2.58% to below 2.50%.
NZ short-end swaps closed little changed on Friday with 2 and 5-year at 4.09% and 4.49% respectively.
The focus for the short-end this week will be the release of the Household Labour Force Survey on Wednesday.
We expect the unemployment rate to fall to 5.9% from 6.0%, with the risks tilted toward a lower reading. This could help short-end yields find a floor after their recent pullback.
We continue to see 2-year swap ‘fair value’ around 4.40%.
The yield on NZGB23s closed up 2 bps on Friday, at 4.28%. However, a pullback in yields is likely this morning given offshore moves on Friday night post-US payrolls.
The wage data, in particular, suggest no additional pressure on the Fed to get going with ‘normalising’ the Fed Funds Rate.
Yields gapped lower on the release, continuing to drift down into the close. US 2-year yields have fallen from 0.53% to 0.47% while 10-year yields have declined from 2.58% to below 2.50%.
The local highlights today will be the release of the ANZ NZ commodity price index and AU retail sales data.
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