The NZ rates curve was marked lower on Friday morning, after the Fed’s decision to leave rates unchanged saw a sharp rally in US bonds.
Treasury yields leaked further lower amid a risk-off tone in Friday’s markets.
Following the 13 bps rally in US Treasuries post-Fed, the local 2-year swap yield fell predictably quickly in morning trade, losing 5 bps to below 2.70%.
The longer-end fell more sharply, with the NZ 10-year swap losing 8 bps soon after the open. Some of these losses were reversed, especially at the shorter-end, as investors took profit heading into the week’s end.
The rally in US rates continued on Friday, despite relatively hawkish language from Fed speakers through the session. A deterioration in risk appetite was responsible, with sharp falls evident across equity markets. The US 10-year Treasury yield closed 6 bps lower at 2.13%, just above support at its 200-day moving average.
This week’s data is largely second tier. More focus will be placed on the heavy schedule of central bank speakers, from the Fed and the ECB. The highlight will be Fed Chair Yellen’s lecture at Amherst on Friday morning.
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Raiko Shareef is on the BNZ Research team. All its research is available here.
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