US Treasury rates are barely showing any change. The 10-year rate has traded in a 2.24-2.27% range.
A June rate hike by the Fed is still seen as a fairly high probability event, with about an 80% chance priced in, but the picture gets murkier from there, with only about 35 bps of hikes in total priced in through to year end.
The NZ rates market showed little reaction to the Budget.
The domestic bond programme was little changed and the government signalled that it recognises the importance of maintaining a sustainable NZGB market and intends to maintain levels of NZGBs on issue at not less than 20 percent of GDP over time. Issuing debt for the sake of it is a position that most other countries would envy.
A new 12-year nominal bond is expected to be launched, via syndication, before the end of the year. NZ’s 10-year bond closed the day flat at 2.84%, hovering around its lows for the year.
Daily swap rates
Select chart tabs
Jason Wong is on the BNZ Research team. All its research is available here.
2 Comments
A fair question, but a functioning, normal bond market is important to have. Without the NZGB base, it can get quite distorted (as we saw when the Govt pulled right back in the 202-2007 period).
Yields get distorted with excessive demand, hurting investors seeking long term safety. And now we have a sizeable and growing flow of KiwiSaver funds at the conservative end any pullback would just make the distortions even greater. Currently demand for 'risk-free' fixed-income paper is high and growing. If you took out a key source of supply, things could get messy for investors who are risk averse.
We just don't have the local corporate issuance at high credit-rated levels. It's up to the Government.
We welcome your comments below. If you are not already registered, please register to 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.