By Kymberly Martin
NZ swaps closed down 2-4bps across the curve on Friday.
US 10-year yields slipped to end the week at 2.32%.
NZ 2-year swaps closed the week at 3.95%. This is nearly 10 bps above its early-month lows. Still, we do not see it breaking above the 4.10% level until well into 2015. For now we would be looking for receiving opportunities above 4.00%. 5-year swap closed the week at 4.22%.
The 2-10s curve closed the week a little flatter at 52 bps. We continue to see a medium-term bias toward steepening. We look for this curve to head back toward 90 bps next year.
NZGB yields also closed a little lower on Friday. The yield on NZGB23s now sits at 4.09%, almost 15 bps above mid-October lows.
On Friday night, US data (retail sales, University of Michigan confidence) were on the high-side of expectation. Subsequently, US 10-year yields pushed up above 2.37%. However, they then subsided to close the week at 2.32%.
The domestic data agenda kicks off today with the October PSI, closely followed by Q3 retail sales figures. Although both will likely confirm the services side of the economy is on a solid footing, this will be unlikely to push OCR expectations higher. For that, the market needs to see firm evidence strong growth is breeding inflation. We expect it will be well into next year before we get compelling evidence on this front.
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