All eyes on inflation data with expectations low, even below the RBNZ's estimate. Curves flattening on global trends

By Jason Wong

Global yields are down slightly on little news, with Germany’s 10-year rate down 1 bp to 0.58% and the US 10-year rate down 2.5 bps to 2.305%, having traded in a tight 2.30-2.33% range.

There has been a hint of yield curve flattening, with the 2-year rate unchanged at 1.355%.

The local rates market was fairly dead yesterday, and swap rates were marked down 1-2 bps across the curve, ahead of today’s much-anticipated Q2 CPI release.

We expect a soft result of 0.1% q/q and 1.8% y/y (below the RBNZ’s pick back in May of 2.1% y/y, which didn’t have the benefit of knowing the recent tumble in oil prices).  A soft result would support our view that the RBNZ isn’t likely to do an about-turn like the Bank of Canada recently did. 

We see the data reinforcing the RBNZ’s decisively neutral policy stance for some time.

If anything, inflation is tracking below the Bank’s projections, given the combination of a stronger NZD and lower oil prices since the May MPS.

Tonight sees the release of UK CPI data and another GDT dairy auction.

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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2 Comments

The German Government is able to borrow money at about half a % .

That's just insane when the Greek Government stock ( also in Euros ) went above 10% in June last year .

And Greece will never be allowed to default , so this is a massive arbitrage opportunity for money fund managers

They have defaulted already, although they will argue it was merely a renegotiation.

https://www.theguardian.com/business/blog/2011/oct/27/voluntary-haircut-...