Global bond rates continue to lift, with Germany’s 10-year rate up a modest 1 bp to 0.47% and the US 10-year rate up a more substantial 5 bps to 2.35%, following the stronger ISM release.
Further curve steepening was evident, with the 2-year rate up 3 bps to 1.41%.
In our weekly review yesterday we noted the case for still-higher rates over the coming quarter.
The air of complacency around the bond market should finally be put to rest, following the coordinated major central bank change in policy guidance recently, and a more volatile period for the rates market could well prevail over coming months. Brace for impact. We wouldn’t be counting on any quick reversal of last week’s substantial sell-off.
NZ’s rates market has remained one-sided, with the 2-year swap rate up 4 bps to 2.37% and the 10-year rate up 7 bps to 3.41%.
The move has been entirely driven by offshore forces and in actual fact the NZ rates market has underperformed the likes of the US and Germany.
The 16 bps rise in the 2-year rate over the past week has come soon after the RBNZ reiterated its neutral policy statement. That said, we have no issue with the market pricing in a rate hike as soon as May next year as that aligns with our own expectation, some 18-months ahead of RBNZ guidance. NZ’s 10-year bond rate rose by 6 bps to 3.035%, and is now up a significant 31 bps over the past four trading 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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