By Kymberly Martin
NZ yields pushed higher by 4-8 bps across the curve yesterday.
Overnight, US 10-year yields traded between 2.09% and 2.14%.
The notable move higher in NZ swap and bond yields across the curve yesterday was a catch-up response to the RBA’s decision to stay on hold, at the previous afternoon’s close.
NZ 2-year swap closed up 4 bps at 3.62% while 10-year closed up 8 bps at 3.87%.
The market now prices around 50 bps of further cuts from the RBA and a 70% chance of an RBNZ cut by year-end.
NZGBs also traded heavily. The yield on NZGB23s now sits at 3.36%.
With quite a sparse domestic calendar through to week end, offshore events will dictate the direction of yields in coming days. Most crucial will be tomorrow night’s US payrolls report which will set the tone for NZ yields at the start of next week.
Last night, US yields were fairly range-bound. 10-year yields dipped toward 2.09% after a slightly lower than expected ADP employment number.
However, yields popped back above 2.13% after subsequent US non-manufacturing PMI releases that show the sector remains firmly in expansion.
However, it would likely take a very significant upside surprise in tomorrow night’s payrolls report for US 10-year yields to break through mid-Feb highs at 2.16%.
This is especially true as speculative positioning is already short 10-year Treasuries. i.e. positioned for higher yields.
Daily swap rates
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1 Comments
Question for BNZ economists about something quite unorthodox .
Bernard Hickey yesterday ran a piece about negative Bond/ Gilt yields and Nouriel Roubini published a piece last night
Why are we not able to issue 5 and 10 year NZ Government Bonds at zero or negative yields like Japan and Europe .
Treasury NZ could elminate the Interest costs of all Govt debt overnight
Given our strentgthening curency , our ZERO face Bonds would atttract investors looking for currency gains , and it seems these investors could not care less about yields anyway
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