US 10-year rates have traded in a tight 2.37-2.41% range, moving to the top of that range after a soft auction.
Like the VIX, bond market volatility is also low, with the MOVE index falling to its lowest level since August 2014. Spreads to European rates have widened a little, as those rates show falls of 1-4 bps.
Ahead of this morning’s RBNZ Statement, the 2-year swap rate trades close to the top of its range of the past couple of months. It closed down 1 bp yesterday to 2.345%.
With the Bank’s tone likely to be one of the market being too far ahead of the (tightening) curve, upside risk to short rates today seems limited.
But we don’t see the market embracing the RBNZ’s view of rates being on hold for an extended period, so that should mute any reaction to a seemingly dovish Statement.
Tonight sees the Bank of England give a policy update and inflation report. No change in policy is expected ahead of next month’s election but the market will be looking out for a hint of a hawkish bias in the MPC comments.
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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