sign up log in
Want to go ad-free? Find out how, here.

Case for September Fed hike builds on strong US data; NZ slump in business confidence, especially rural, clouds local outlook

Bonds
Case for September Fed hike builds on strong US data; NZ slump in business confidence, especially rural, clouds local outlook

By Raiko Shareef

Local interest rates fell on Friday in the face of a slowing ANZ business survey.

US bond yields climbed sharply overnight, thanks to a swathe of strong US data.

Headline business confidence in NZ nearly halved from April to May, falling from 30.2 to 15.7. Much of this can be laid at the feet of an understandably pessimistic agricultural sector, but there was a hint of moderation across the wider economy.

To boot, the inflation expectations component of the survey slowed from 1.78% to 1.62%. For a market that is warily eyeing the prospect of RBNZ rate cuts as soon as next week, this was enough to send interest rates back to the bottom of recent ranges. The 2-year swap yield fell 5 bps to 2.34%.

Offshore, the case for a Fed Funds Rate hike in September builds, as US data continues to print with a positive beat.

The long-end of the US curve led last night’s sell-off, with the 10-year bond yield 7 bps to 2.19%. Bonds (and markets more broadly) show little sign of risk aversion, despite the looming deadline on Greece’s credit crunch.

It is an extremely busy week in global markets, with highlights including NZ’s terms of trade, the RBA decision, Australian GDP, and of course, the monthly US employment reports.

---------------------------

Raiko Shareef is on the BNZ Research team. All its research is available here.

Daily swap rates

Select chart tabs

Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.