By Raiko Shareef
NZ interest rates were unchanged in an extremely quiet trading session for local markets yesterday.
The whole curve was marked down by 1 bp, with the 2-year swap closing at 4.07%.
Of course, the local market is wary of moving too much ahead of the RBNZ’s meeting on Thursday.
We expect the RBNZ to be more dovish, but we still see the 2-year swap to break much below 4.0%.
The market currently prices an OCR not much above 4.25% in two years’ time.
The Bank’s medium-term commitment to ‘normalise’ the OCR will likely help keep short-end yields supported.
Offshore, US 10-year Treasury yields rose by 1 bp to 2.47%, its highest level in a month.
Rather than being data-driven, analysts point to a sizeable chunk of supply due this week as weighing on bond prices (and lifting yields).
* German exports strong at +4.7% m/m (+0.6 exp), but imports weak at -1.8% (+0.2% exp).
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