Interest rates rise everywhere except here as RBNZ views awaited. Bond markets ignore Fed pause

By Raiko Shareef

Global interest rates continued to rise overnight, with US Treasury yields adding to gains despite the very weak Q1 GDP report.

Local markets tried, but failed, to reflect those gains yesterday, with investors wary of a dovish turn from the RBNZ this morning.

German 10-year bund yields are up 12 bps, the biggest single-day gain in two years, on speculation that the rally has gone too far. Comments from two influential bond managers, who suggested positions to take advantage of rising yields, helped to drive these moves.

This clearly had an influence on the US bond market.

For the second day, US interest rates moved at odds with the flow of incoming US data. 10-year Treasury yields are up 3 bps for the day to 2.04%, despite the sizeable downside surprise in US GDP.

The FOMC statement this morning offered few new insights, with the impact on interest rates appropriately muted.

NZ interest rates tried to follow the offshore gains on Tuesday night, opening slightly higher.

But continued wariness ahead of the RBNZ meeting kept a lid on the market. The 2-year swap close 1 bp lower at 3.53%.

Today, the local community roundly expects a dovish tilt from the RBNZ, relative to the March MPS.

A heavy data calendar looms for the rest of the day, with the BoJ meeting, US core PCE, and the Chicago PMI likely highlights.