By Doug Steel
US 10 year Treasury yields initially rose overnight as US PCE annual inflation came in slightly above expectations but reversed course on other mixed data and as oil prices pressed lower.
After looking up toward 2.32%, US 10 year Treasury yields currently sit down 4 bps for the day, at around 2.25%. This saw some curve flattening as short end yields eased around 1-2 bps.
European long end yields also fell, with 10 year German Bund yields down 5 bps to slip below 0.50% for the first time in a week.
Lower yields offshore will set the initial tone locally today, but with some focus on NZ’s Q2 labour data this morning. NZ 2-year swap rose 1 bp yesterday to close just under 2.23% but remains within the tight 2.20% to 2.25% range that has contained it over the past two weeks. NZ 10-year swap rose about 3 bps yesterday to close at 3.315%.
We don’t expect any market movement from this morning’s speech by RBNZ Deputy Governor and Head of Financial Stability, Grant Spencer, on banking regulation.
Overnight some Fed speak is on the agenda, with the ADP employment survey the latest guide on the US labour market ahead of Friday’s payrolls.
Daily swap rates
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Doug Steel is a senior economist at BNZ Markets. All its research is available here.
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