sign up log in
Want to go ad-free? Find out how, here.

Rate curve near its flattest, corporates get option to extend durations

Bonds
Rate curve near its flattest, corporates get option to extend durations

By Kymberly Martin

In a relatively quiet day, NZ swaps closed up 1-2 bps.

Overnight, US 10-year yields traded between 2.48% and 2.52%.

In a fairly uneventful day, NZ 2-year swap closed up 2 bps, at 4.09% 2.09%. It appeared little impacted by the pre-election dip in business confidence shown in yesterday’s ANZ business confidence index.

10-year swap closed at 4.57%, taking the 2-10s curve to 48 bps, its lowest level since November 2008.

This should attract attention from corporates, to consider extending duration, even if they currently meet overall hedging benchmark ratios.

Forward starts could be once option to take advantage of the current flatness of the curve.

We do not expect the curve to get too much flatter in this cycle. The risk of near-term steepening is presented by a bounce in US long yields from what we see as the lower end of ranges.

Overnight, US and German bonds opened under selling pressure as equities rallied. However, yields reached a peak, around mid-night and later fell back to their previous levels.

Softer than anticipated US data (Chicago PMI and Consumer confidence) ensured yields stayed at these lower levels. The yield on US 10-year yields sits at 2.48%.

Today there are no domestic data releases scheduled. The local focus will be AU retail sales, and house price data. The latter is important as the RBA and APRA toy with the idea of macroprudential tools, to target the investor market in housing. The September China PMI will also be released. Tonight PMI data will be released in the UK, EU and US.    

 
 
 
 
 
 
 
 

Daily swap rates

Select chart tabs

Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

2 Comments

When you say the 2 year is at 2.09, do you mean 4.09?

 

"In a fairly uneventful day, NZ 2-year swap closed up 2 bps, at 2.09%"

Up
0

Yes. Thanks for heads-up. Corrected now.

Up
0