By Raiko Shareef
NZ interest rates continue to grind lower, as global growth concerns weigh on international rates markets.
Local swap yields fell by 2 bps across the curve, with the 2-year yield closing at 3.98%.
We consider these low levels as relatively good value, given our outlook for the OCR.
But we also suspect there may still be some further room on the downside, given the cues being taken from global rates.
After Monday’s Columbus Day holiday, US rates played catch up to ongoing risk aversion.
The US 10-year Treasury yield is 6bps lower at 2.22%, lower than its level before last year’s taper tantrum. Rather than US-specific information, this slide reflects the poor tone of global data release overnight.
Overnight, the US retail sales release will be the data highlight for global bonds.
Locally, we will be watching Fonterra’s GlobalDairyTrade auction, which may set the tone for NZ swap yields tomorrow.
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