Markets baffled by odd yield tracking. UST yields slip, local swap rates drift up on very low volumes. Attention turns to QSBO, RBA and dairy auction

By Jason Wong

The movement in UST yields is a bit of a mystery. 

The 10-year yield continued to track higher during the local and Asian trading session on no fresh news, reaching a fresh high of 2.37% last evening, before beginning to fall.

Reports of a shooter in Las Vegas were beginning to hit the screens at that time and we’re not sure if that was behind the reversal. This morning it is sad to read that the event was the deadliest mass shooting in modern US history.

Some support in yields was reached around the low of 2.32%, before ticking 1 bp higher after the strong ISM report. The current yield is 2.335%, down around 2 bps from the level at the NZ close.

The local rates market was dead yesterday, given the Australian holiday.  There was a slight uptick in rates at the long end of the curve of about 2 bps, as yields were marked higher as UST yields drifted higher. 

Today’s NZ QSBO isn’t expected to be a market mover and neither is the RBA’s statement later this afternoon.

The RBA is expected to maintain a neutral tone, despite recognition of a slightly better economic outlook. 

Tonight sees another GDT dairy auction, and with whole milk powder future prices rising recently, it is expected to show positive price momentum.

Daily swap rates

Select chart tabs »
The '1 year %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac
The '2 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac
The '3 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac
The '4 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac
The '5 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac
The '7 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac
The '10 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: Westpac

Jason Wong is on the BNZ Research team. All its research is available here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.