NZ interest rates closed marginally lower across the curve yesterday, while US interest rates rose sharply off the back of a strong retail sales report.
The local rates market rallied very modestly, to the tune of half a basis point, in another day with few drivers.
An early push higher at the longer-end of the curve was met with robust receiving interest.
The strong gain in dairy prices overnight, combined with a US rates sell-off, should help support local interest rates at the open.
US rates are up sharply this session, triggered by upward revisions to July’s retail sales reading. Core retail sales (excl. auto and gas) undershot expectations in August, but July’s print was bumped higher from 0.4% m/m to 0.7% m/m. This will firm up analyst expectations for consumption growth in Q2.
To be fair, the spike higher in Treasury yields came amid relatively light trading conditions. Nevertheless, the 2-year bond yield rose 6 bps to 0.79%, a new cycle high. The 10-year bond yield is up 9 bps to 2.28%, back above the 100-day moving average which capped sell-offs since mid-August.
Today, the local current account reading is unlikely to be too much of market-mover, especially ahead of the more important GDP release tomorrow. US CPI will be the evening’s data highlight.
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Raiko Shareef is on the BNZ Research team. All its research is available here.
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