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Australian data undermines yield gains as does the ECB's policy statement. Eyes on NFPs and G20 meetings

Bonds
Australian data undermines yield gains as does the ECB's policy statement. Eyes on NFPs and G20 meetings

By Raiko Shareef

An incredibly quiet day for NZ interest rates, with the short-end pinned down by a sell-off in Australia, and long-end rates content to drift higher in sympathy with Treasuries.

Some of the latter may be reversed today, as global bond yields are lower after the ECB modestly strengthened commitment to its QE programme.

Local interest rates initially traded higher, with the 2-year swap yield pushing toward 2.83%. But those moves were unwound into the afternoon, in part reflecting the rally in Australian peers after a weak AU retail sales report.

Our NAB colleagues warn against reading too much into the headline weakness, and expect consumption growth to strengthen going forward. Nonetheless, Australian short-end rates closed 5 bps lower on the day, and the NZ 2-year swap finished up 1bps at 2.81%.

Offshore, the ECB policy statement and press conference held the focus in what was otherwise a relatively dull evening. The suggestion that the ECB could extend the bond-buying programme beyond the scheduled September 2016 end date saw bond yields fall. German 10-year bond yields are 6 bps lower at 0.72%, dragging US equivalents 2bps lower to 2.17%.

Tonight will be dominated by the US employment reports.

The G20 meetings this weekend will also be eyed for meaningful comments from finance ministers and central bankers, with China an item on the agenda.


Raiko Shareef is on the BNZ Research team. All its research is available here.

Daily swap rates

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Source: NZFMA
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Source: NZFMA
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Source: NZFMA

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