The NZ interest rate curve continued to steepen yesterday, driven by the front end of the curve.
The US bond market saw a ho-hum session, with rates little changed.
The local 2-year swap rallied another 2 bps to 2.71%, on fairly good volume, as the market continues to move further into pricing a sub-2.50% OCR. This could well extend, especially if we are correct that the RBNZ will cut again in October, taking the OCR to 2.50%. The market only prices in that prospect by March.
Offshore, the US bond market traded rather listlessly, ahead of the FOMC decision on Friday morning. To be fair, a relative dearth of data (and no US releases at all) meant there was little to trade off. The schedule picks up the pace tonight, but even so, we doubt investors would be keen to materially adjust their positions in front of the Fed. It could be a dreary week.
On Australia’s leadership spill overnight, this should have few, if any, implications for rates markets, with the outlook for fiscal policy unchanged.
Today, the RBA Minutes are expected to offer little to the debate, having been superseded by a comprehensive speech by Deputy Governor Lowe last week. The ZEW survey and US retail sales will be highlights. On the dairy auction, we expect another moderate gain in prices.
---------------------------
Raiko Shareef is on the BNZ Research team. All its research is available here.
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.