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Despite the increased market volatility in equity markets and currencies, the US Treasuries market is comparatively sedate, with the 10-year remaining in a trading range.
The 10-year rate is down 1 bp to 2.23%, and ranged between 2.22% to 2.26%.
The first NZ rates trading session of the year was a sleepy affair, with traders more inclined to regale their surfing and golf stories of the festive session than actively taking positions. The 2-year swap rate fell by 1.5 bps to 2.83%.
The NZ government bond market showed more price movement, reflecting some catch-up from previous offshore trading sessions, although with the 10-year bond down 9 bps to 3.49%, some outperformance over the Australian and US markets was apparent.
The next NZ nominal bond tender is not due until 18 February, meaning a relative scarcity of bonds over coming weeks.
At this time of the year there can be offshore interest in the NZ market, as investors think about positioning for the year ahead, and price movements get exaggerated in the fairly illiquid market.
On generic rates the NZ-US 10-year rate spread sits at around 124 bps. We expect the NZ bond market to outperform on any US Treasury sell-off this year, so that spread could fall below 100 as the year progresses.
Daily swap rates
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