Bonds
Market watching for hints RBA will cut interest rates
20th Mar 12, 8:25am
by
by Kymberly Martin
It was a fairly quiet day in NZ interest rate markets, but yields managed to close up 5-7bps on the swap and bond curve. Overnight, Offshore ‘safe haven’ yields rose further.
Yesterday, NZ swaps attracted payers, especially at the longer part of the curve. In low liquidity this saw swap yields push higher, with 10-year closing at 4.62%. This is a new closing high since November. It opens the way for a push up to the next resistance level at 4.78%.
Similarly, 2 and 5-year yields broke a little higher. 2-year yields that closed at 3.14% are now eyeing resistance at the 3.20% level. They last traded at that level in October last year.
Bond yields also closed up 5-6bps. The yield on NZGB21s closed at 4.26%, its highest closing level since mid November. However, relative to its US and AU counterparts NZ 10-year bond yields remain close to the bottom or recent ranges. This suggests further relative upside to NZ long bonds yields.
Early this morning, US 10-year yields rose further after more upbeat comments from US Fed representative Dudley. In addition, US company, Apple, initiated a dividend payment suggesting corporate US is building in confidence.
The US 10-year rose from 2.30% to 2.34%, its highest level since late October. German equivalents also rose to 2.06%, their highest level since December.
This evening, Fed Chairman Benanke will speak. Today the RBA’s March minutes will be released. Any hints that there is less probability of further RBA rate cuts (40bps still priced by market in the year ahead), should boost AU short-end yields.
This could also see NZ short-end yields nudge higher, as implications are extrapolated across the Tasman.
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1 Comments
This could also see NZ short-end yields nudge higher, as implications are extrapolated across the Tasman.
Local retail short term depo rates @ 4.5% surely already reflect the 4.25% RBA overnight cash rate?
But the somewhat redundant RBNZ 2.5% OCR still serves as the reference finance rate for professional carry trades. Nice if you can get it.
You just have to love Bollard and his favoured friends.
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