By Kymberly Martin
In a relatively quiet start to the week, NZ swaps closed down 2-4 bps.
US 10-year yields traded sideways around 2.56% overnight.
Yesterday’s move lower in NZ yields appeared to reflect Friday night’s moves offshore. In this regard, longer-dated yields declined more than short-dated. 10-year swap declined 4 bps, to 4.67%, while 2-year closed down 2bps, at 4.04%.
Meanwhile, NZGB yields declined 5-6 bps
This move mimicked offshore moves but was also likely assisted by the removal of overhanging election uncertainty.
The yield on NZGB23s closed down 6 bps, widening swap-bond spreads.
We anticipate further widening.
Overnight, German bund yields declined after comments from ECB President Draghi. The key part of Draghi's speech was on Asset Backed Securities (ABS) purchases. The ECB’s intention is to add covered bonds, but there is no appetite to go down the credit curve for now.
He also said, “We stand ready to use additional unconventional instruments within our mandate ... to further address risks of a too-prolonged period of low inflation.”
Draghi is likely being purposely ambiguous, but the market appears to take his comments to mean that full-blown QE is a possibility. German 10-year yields declined from 1.03%, back toward 1.00%.
Meanwhile, in a data-light evening, US 10-year yields paddled sideways around 2.56%.
Today, there are no domestic data releases scheduled. Chinese, Eurozone and US PMI data will be released.
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