By Kymberly Martin
NZ swaps closed down 4-6bps following the RBNZ’s meeting.
Overnight, US 10-year yields traded a tight path above 2.50%.
The RBNZ maintained a clear tightening bias at its meeting yesterday.
However, as expected its published 90-day bank bill track showed a less assertive track ahead. It implies a resumption of rate hikes around March next year.
But the Bank has made the published track purposely vague, which could imply a rate hike any time between this December and next September.
The Bank also reduced its OCR track further out to suggest it now sees the OCR peaking around 4.50-4.75%, compared to at least 5.0% previously.
As a result, NZ swaps closed down across the board. 2-year swap closed down 6 bps, at 4.05%, while 10-year closed down 4 bps, at 4.69%. At 64 bps, the 2-10s curve is at its highest level since early-August.
Across the Tasman, AU short-end swaps lurched higher after the release of the AU employment report. AU 3-year swap gapped from 3.05% to 3.14% before later returning to end the day around 3.08%.
The market now prices virtually no chance of a rate cut from the RBA in the year ahead, and more than a 50% chance its cash rate will be 25 bps higher by the end of 2015.
Over a data-light night, US yields showed little direction. US 10-year yields traded a tight range between 2.51% and 2.54%, sitting at 2.53% at present.
Today, the BNZ PMI and NZ food prices will end the domestic data week. US August retail sales will be the focus for rates markets tonight.
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