The US 10 year Treasury yield fell a couple of basis points after the FOMC announcement and it has since traded in a tight range.
From a low of 2.43% this morning, possibly influenced by lower European and UK rates, it is now just under 2.47%, near the NZ close.
We still see US Treasuries in a consolidation phase, with upward pressure over a period of robust economic momentum limited by the fact that market positioning remains quite short and political headlines.
Our short-term tactical bias is for US10s to respect the 2.25%-2.60% range for a while yet, before ultimately moving higher. Fed pricing isn't significantly changed from pre-FOMC levels, with the OIS market pricing in 25 bps of hikes by June and 53 bps by year-end.
Trading is typically quiet ahead of the US non-farm employment report which is released tonight. It should be another solid report that adds to the case for Fed hikes later this year. This should be buttressed by another strong ISM non-manufacturing figure.
Local trading should be quiet and range-bound today ahead of the US data tonight.
Yesterday we saw a steepening of the swap curve, with the 2-year rate down 1.5 bps to 2.415% and the 10-year rate up 2 bps to 3.585%.
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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