Markets held back by Greek news, unsure of what it means. PMIs offered a positive surprise but failed to move markets

By Raiko Shareef

NZ interest rates closed the week in subdued fashion, with a modest sell-off.

On Friday night, US Treasury yields closed unchanged, recovering earlier falls as an interim resolution on Greece was reached.

Local swap yields rose across the curve, led by a 5 bps rise in the 10-year to 3.86%.

The 2-year swap closed 2 bps higher at 3.62%.

There was little local data or news to inspire direction, with local rates taking their cues from the 3 bp sell-off in Treasuries the night before. We suspect local investors were otherwise distracted by events in Wellington in the afternoon session.

US Treasury yields slipped lower heading into the week’s close, as optimism faded that a deal on Greece would be reached.

Even a positive data surprise in the Markit manufacturing PMI failed to lift the mood. But a few hours before markets closed, news broke that an agreement-in-principle had been reached. US 10-year yields took back earlier losses to close unchanged at 2.11%.

Greece’s agreement with its creditors is yet to be finalised. Its government must present a suitable reform agenda, which will then have to be ratified by national parliaments.

A busy week ahead for global markets, with Fed Chair Yellen’s double-header testimony to Congress in sharp focus. That kicks off in the early hours of Wednesday morning.