US 10-year Treasury yields trended down throughout the Asian session and fell further on the US open.
They currently trade at 2.30%, down 6 bps for the day and over 3 bps lower since the NZ close. They haven’t closed below 2.30% since late-November, with this level representing an area of strong technical support. A close below this level would set up an easier path for even lower rates, with the next area of technical support well south. The 200-day moving average sits at 2.03%.
US short rates have also been affected by the increased geo-political risk.
The market is taking a view of less chance of rate hikes this year if geopolitical risks linger in the background.
The 2-year Treasury rate is down 4 bps to 1.23%. According to the OIS curve only 31 bps of rate hikes are priced in by year-end, down from 35 bps a week ago.
The market didn’t react to Chair Yellen’s remarks yesterday at a university event. She reiterated the Fed’s house view of cautiously raising rates against a backdrop of full employment and rising inflationary pressure.
NZ’s yield curve saw downward pressure yesterday, a reflection of global forces.
Swap rates were down 2-5 bps across the curve, with larger falls at the longer end of the curve. NZ-US bond spreads continue to trade in a tight range, so the NZ 10-year government rate of 3.06% is threatening to break the lower end of its trading range since November.
It could easily push below the 3% mark over coming sessions.
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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