By Kymberly Martin
NZ swap and bond yields closed up 2-5 bps yesterday across the curve.
Overnight, US 10-year yields consolidated around 2.63%.
NZ swaps pushed higher following the US FOMC inspired moves offshore. The move higher was not interrupted by the release of NZ 2Q GDP which came in not far from expectation.
The curve steepened as 10-year swap rose 5 bps, to 4.68%. Paying pressure at the long-end was likely exacerbated by the DMO’s issue of 2027 maturity bonds yesterday, as some investors looked to buy relative to paying swap.
Overall, swap yields ended the day a little off their intra-day’s highs. 2 and 5-year swap closed at 4.05% and 4.42% respectively.
The main event for NZ bonds yesterday was the DMO’s tender of NZ$200m of their latest 2027 maturity. The auction was solid, if unspectacular. The 3.1x bid-to-cover ratio was not bad given the lingering sentiment from the morning’s US FOMC meeting.
Yields on NZGB23s and 27s closed up 4 bps, at 4.27% and 4.44% respectively.
Overnight, US data (housing starts, Philadelphia Fed business survey) were on the lower side of expectation. The uptake of the ECB’s TLTRO loans to banks was also at the lower end of expectation, at €82.6b.
But the market appeared rather exhausted from all its action yesterday morning. German 10-year bonds traded up off intra-night lows below 1.05% to sit at 1.08% this morning. US 10-year yields only managed a 3 bps range, trading at 2.63% this morning.
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