NZ rates drifted higher yesterday after another double-digit gain in dairy prices.
US bonds yields unwound some of the risk-aversion rally seen on Tuesday night.
The Global Dairy Trade Index gained 10.9% ahead of NZ’s market open yesterday. The breakdown included a 12.1% rise in wholemilk powder prices, to an average of US$2,078/T. This auction tilts the balance of risk around our $3.80/kgMS milk price forecast for the 2015/16 season to the upside.
NZ interest rates drifted 3 bps to 4 bps higher across the curve, on very light liquidity. The market seems reluctant to push pricing too far either way, ahead of the RBNZ’s MPS next week. The 2-year swap yield closed 3 bps higher at 2.80%.
US bonds sold off, retracing some of the rally they experienced in Tuesday night’s risk-averse market. The 10-year bond yield has been well supported above the 200-day moving average at 2.13% over the past four sessions. The 10-year is 4 bps higher at 2.19%. The sell-off in US bonds came despite a rather lacklustre evening for US data.
First up today is NZ’s Q2 Building Work Put in Place. We and the market look for a moderate gain.
The Australian retail sales report will be eyed, given the weakness evident in consumption in yesterday’s Q2 GDP report. A slew of services PMI readings are due globally.
Raiko Shareef is on the BNZ Research team. All its research is available here.
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1 Comments
The 10-year is 4 bps higher at 2.19%. The sell-off in US bonds came despite a rather lacklustre evening for US data.
Cripes- the green shoots of QT?
.... the PBoC has been defending the renminbi, selling FX reserves and reducing its ownership of global fixed income assets. The PBoC’s actions are equivalent to an unwind of QE, or in other words Quantitative Tightening (QT). Read more and more
These so-called FX reserves will be re-classified as bail-in ready as it suits - most if not all are just veiled bank liabilities - who else monetises sovereign IOU issuance, other than banks?
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