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NZ 2yr and 10yr swaps trading at 2.40% and 3.40% respectively; UST rates reverse yesterday's move up across the curve, 10yr up 5bps to 2.37%; UK and Germany 10yr rates up 3bps

Bonds
NZ 2yr and 10yr swaps trading at 2.40% and 3.40% respectively; UST rates reverse yesterday's move up across the curve, 10yr up 5bps to 2.37%; UK and Germany 10yr rates up 3bps

By Jason Wong

In a reversal of yesterday's move, the US 10-year rate is up 5bps to 2.37%, with rates up across the curve. It has been a fairly steady rise, suggesting bigger factors are at play, with UK and Germany 10-year rates up about 3bps. Following the CPI release the UST10s sell-off extended by just 1bp. The market still believes that the Fed's next move is more likely to be in June than earlier. OIS pricing suggests some 23bps of hikes are priced in by June compared to 9bps by March.

Yesterday in the local rates market trading was active following the very quiet sessions of late.  However, the net result was little change in swap rates, with the 2-year and 10-year rates little changed at 2.40% and 3.40%. The World Bank ended up issuing $550m of a new 5-year Kauri at mid-swap +50bps after initially seeking $200m.

Today, the Debt Management Office holds its first bond tender since mid-December, offering $200m of 2025 bonds.  We expect to see some solid demand.

There are a number of releases in the local time zone, with some comments from Yellen hitting the wires from 9am, although her speech tomorrow looks more relevant to the market.  The second-tier NZ economic releases are not generally market moving, while the Australian labour market report can often lead to a spikey currency reaction. Tonight, the ECB meeting shouldn’t elicit much surprise, following the announcement to extend QE policy in December.

Daily swap rates

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Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA


Jason Wong is on the BNZ Research team. All its research is available here.

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