After trending lower after the NZ close, the US 10-year Treasury rate jumped some 8 bps after the retail sales and PPI data were released before edging lower to close up 3 bps at 2.40%.
The daily closes last week were all within 2.36-2.40%, indicative of the consolidation phase the market finds itself in after reaching as high as 2.60% in mid-December.
Current market positioning suggests the pullback in US yields could have further to go.
Speculative short positions in US 10-year Treasuries remain at historic levels. i.e. the market is positioned in anticipation of higher yields. Unwinding of these positions could extend the decline in yields near-term.
In local trading on Friday, rates were higher across the swap curve in the order of 3 bps, with the 2-year rate closing at 2.40% and the 10-year rate closing at 3.41%.
As with US rates, NZ rates traded in a fairly tight range last week in quiet market conditions. As traders return to the market and the local dataflow begins, liquidity conditions should improve. That said, it’ll be another quiet day ahead with the US market closed for the Martin Luther King holiday and lack of data releases over the next 24 hours.
The first major local release will be Tuesday’s Quarterly Survey of Business Opinion.
Daily swap rates
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Jason Wong is on the BNZ Research team. All its research is available here.
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