US rates are lower at the short end of the curve, with the 2-year Treasury rate down 1 bp and the market pricing out Fed tightening risk in the money markets.
The 10-year rate has nudged up 1 bp from Thursday’s close to 2.25%, after trading as low as 2.20% in the Asian session yesterday.
The restrained move in Treasury rates, even after the soft CPI and retail sales data, reflects the significant move lower in rates over the past month. Recall that in mid-March the 10-year rate was as high at 2.63%.
On Thursday, NZ’s yield curve flattened significantly, a reflection of the significant fall in US rates after Trump’s interview in the WSJ. The 10-year (Apr-2027) government bond yield closed the short week down 7.5 bps to 2.93%, its lowest level since November. The 2-year swap rate remained at 2.27%, well anchored by steady monetary policy expectations, while 5-year and 10-year swap rates closed at fresh lows of 2.795% and 3.265% respectively.
Tonight sees the release of US housing and industrial production data, while the GDT dairy auction is expected to show a small lift in pricing.
Overall it’s a fairly quiet week ahead on the global economic calendar. Locally, the focus will be on Q1 CPI data on Thursday.
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Jason Wong is on the BNZ Research team. All its research is available here.
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