NZ swaps closed up 3-8bps yesterday. Overnight, US 10-year yields traded between 2.36% and 2.43%.
In the absence of domestic data releases, NZ swaps essentially took their cue from the previous night’s Greece-inspired moves offshore.
NZ 10-year swap closed up 8bps, at 3.96%. This has steepened the NZ 2-10s curve to 87bps.
Over the medium term we continue to see further steepening of the curve, to above 110bp by year-end. But near-term the curve will likely be whipped around as the long-end follows moves in US yields, which in turn will be highly influenced by news flow from Greece.
German 10-year yields have traded a relatively tight range overnight, now at a similar level to yesterday morning, at 0.87%. Greek 10-year yields have fallen another ½ percent, to 10.36%.
US yields experienced a bit of volatility in the early hours of this morning. Fed member Powell (hawkish leanings) gained some air-time during the hiatus in the Greece situation.
He said his forecasts were for rate rises in Sept and December (similar to our own). Although this should not have been news, to hear a Fed member talk so directly of a hike as early as Sept helped prompt a bit of a sell-off in Treasuries.
However, direction turned following disappointing US durable goods orders. Then yields continued to drift lower despite better-than-expected US new home sales data.
US 10-year yields trade around 2.38% currently, having traded toward 2.43% intra-night.
Today we once again have a sparse calendar locally. The latest release of US 1Q GDP may gain some attention tonight. Otherwise focus will remain on Greek headlines.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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