By Raiko Shareef
NZ swap rates were hardly changed yesterday, with some mild flattening thanks to receiving pressure at the long end of the curve.
Likely the rally in US 10-year Treasuries the night before had something to do with that.
The NZ 2-year swap yield closed 1 bp higher at 4.08%.
The focus for the day was the RBA meeting, after the local market’s close. As it happened, there was little to inspire to any movement from that quarter. The RBA published a near carbon copy of last month’s statement, with the only new feature an acknowledgment of higher inflation.
But the Bank was at pains to stress that subdued wage pressure means that the inflation outlook remained consistent with the target.
Overnight, US Treasury yields initially pushed higher, as US data including services ISM and factory orders printed stronger than expected. But this was quickly reversed as investors became nervous about the prospect of a Russia invasion of eastern Ukraine.
Vague headlines from Russian President Putin to prepare retaliatory sanctions in response to those applied by Europe and the US put the market on notice. Then came warnings from Russian officials of a humanitarian crisis brewing in eastern Ukraine, as Ukrainian government forces step up their battle against pro-Russian separatists.
Markets are concerned that Putin may order Russian troops into Ukraine under the guise of a humanitarian mission.
The recent (widely reported) build-up of Russian troops along the border would appear to add credence to that theory.
The US 10-year Treasury yield currently sits unchanged for the day at 2.48%, having pushed as high as 2.52% earlier in the session.
Today, markets will keep a closer eye on that geopolitical front, while local investors also look to the NZ Q2 labour force data for cues.
Other news:
*AU trade balance fell by less than expected at -$1,683m vs -$2,000m exp.
*US Markit services PMI printed on expectations at 60.8.
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