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Rare Kauri adds receiving interest, DMO signals more large IIBs and syndication, ears on central bank talk

Bonds
Rare Kauri adds receiving interest, DMO signals more large IIBs and syndication, ears on central bank talk

By Kymberly Martin

NZ swaps and bonds closed up 2-3 bps yesterday.

Overnight, US 10-year yields traded between 2.36% and 2.40%.

The nudge higher in NZ yields largely followed from the improvement in market sentiment on Friday night/over the weekend. There appeared to be some receiving interest at the mid-curve on the back of a $100 mln 5-year Kauri issue by the African Development Bank. The Kauri issuance space has been quiet over the past couple of months following the surge of issuance early in the year.

NZ 2-year swap closed up 2 bps, at 4.04%, while 5-year closed at 4.36%. The 2-10s curve sits at 58 bps. We see further flattening to a trough of 40 bps in the year ahead, but are alert to the risk of near-term steepening if US Treasury yields rebound from lows.

Yesterday’s PREFU showed no changes to the DMO’s debt issuance plans previously announced in the May Budget. NZ$8 bln of gross issuance is projected this fiscal year, of which, up to NZ$3 bln may be in inflation-indexed bonds.

Overnight, US 10-year yields dipped to lows of 2.36% ahead of the release of US CPI and stronger than expected US July housing starts data. US 10-year yields rebound to 2.40% after the releases.

Today, there is little in the way of domestic releases but all eyes will be across the Tasman on RBA Governor Stevens’ semi-annual testimony.

Tonight, both the Bank of England and US Fed will release their most recent Minutes.

 
 
 
 
 
 
 
 

Daily swap rates

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Source: NZFMA
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Source: NZFMA
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Source: NZFMA

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