By Kymberly Martin
NZ swaps closed down 3-6bps on Friday.
US 10-year yields crept up from 2.49% to 2.52%.
There was a sharp further flattening of the NZ swap curve on Friday. Longer-dated swaps followed the offshore decline in yields.
The short-end held up comparatively well, supported by payside flow emanating from mortgage books. 5 and 10-year swap closed at 4.39% and 4.74% respectively.
We expect to see corporate paying enticed back at these levels.
10-year swap is now at its lowest level since mid-August last year and some 60bps below its December highs.
We do expect further curve flattening, (2-10s) to a trough of 50bps in the year ahead (currently 78bps). But we anticipate this will occur by short-end yields rising faster than long-end yields as the OCR hiking cycle progresses.
Meanwhile NZ bond yields closed flat to up 1bps on Friday. Friday’s DMO tender of $200m of NZGB2020s was solid rather than stellar. The relative moves saw swap-bond spreads narrow 4-5bps on the day.
On Friday night, US Treasury yields pushed off their lows in the backdrop of modestly positive equities and mixed US data. Overall, US 10-year yields crept up from 2.49% to 2.52%.
No chart with that title exists.
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.