UST 10yr yields trading at 2.34%, about 2 bps lower than the NZ close; local rates market was quiet yesterday, with rates down 1-2 bps across the swaps and government curves, driven by global forces

By Jason Wong

US 10-year Treasury yields are slightly lower, trading at 2.34%, about 2bps below the NZ close.  Trump will be giving more snippets of his tax reform plans in coming weeks, but the market is less confident of reform passing, giving his very public spat with Senator Corker, a vote he needs to rely on. 

In Fed-speak, known dove Evans was hosing down rate hike talk, telling reporters that it’s too soon to decide on a December rate hike.  In an earlier speech he argued that the Fed’s decision to allow its balance sheet to begin slowly shrinking this month would deliver some degree of policy tightening. Given that backdrop, he said “there’s room for a very honest discussion later this year as to whether or not it’s the right time to raise rates.”

Meanwhile, known hawk George said the Fed should continue to gradually raise interest rates and shouldn’t place too much emphasis on meeting its specific 2% inflation target.

The local rates market was quiet yesterday, with rates down 1-2bps across the swaps and government curve, driven by global forces.  Attention was diverted elsewhere as Australia sold a record $3.5bn of new 5-year bonds at a yield of around 2.42% with nearly $13bn of bids, highlighting that the demand for yield remains insatiable.

Today sees the release of REINZ housing market data, which should remain soft, food prices and the ANZ consumer confidence survey, likely fell after earlier surprising pre-election strength.  US PPI data tonight only hold some vague interest with Friday’s CPI data much more important.  Draghi will appear in a panel discussion tonight, which will be a focus for the market.

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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