By Kymberly Martin
NZ swaps closed little changed on Friday.
On Friday night, US 10-year yields slumped from intra-night highs above 2.34% to close at 2.28%.
NZ 2 and 5-year swap closed at 4.02% and 4.28% respectively. The 2-10s curve sits at 45bps.
We do not expect curve inversion in this cycle, and believe we may be approaching cyclical trough. However, near-term the curve is almost entirely in the hands of moves of US Treasuries as the short-end remains tightly range-bound.
On Friday night, US Treasuries rallied across the curve, as the fall in equities was led by cyclical sectors.
US 10-year yields, at 2.28%, have dipped to their lowest levels since mid-June last year.
US 2-year yields have returned to levels they traded at, in mid-August this year, at 0.42%.
These moves will likely see downward pressure at the long-end of the NZ curve today. It is quite a thin week on the NZ data front.
Today we receive September Food Prices. We expect a 0.1% fall as part of the 0.5% reading (1.2%y/y) we expect for Q3 CPI (due 23 October). So nothing in this data to spur NZ yields any higher.
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