by Kymberly Martin
NZ yields closed up 2-6bps across the curve yesterday. Overnight markets returned to a more tentative mood.
The NZ 2-year swap yields closed up 5bps at 2.95% and the 5-year at 3.61%. The 2s-10s curve steepened up a little to 138bps. The spread between 10-year swap yields and the equivalent bond yield sits just under 20bps, around the middle of a very steady range since the end of last year.
Bond yields closed up 2-3bps across the curve with the yield on NZGB23s at 4.16%. The NZ-AU 10-year bond yield spread has narrowed to 28bps as AU 10-year yields have also risen, by around 6bps. The DMO has announced the auction for today with 100m of 17s, 19s and 23s.
Overnight US 10-year yields dropped back below 2.0%. In the absence of key data releases the market never-the-less remains nervous about Europe, particularly as we approach an auction of Spanish bonds tonight. German 10-year yields also subsided to 1.72%, but spreads of non-core European bond remained fairly stable.
The US earnings season continues to progress solidly if unspectacularly. With around 40 of the 500 companies reported, 80% have surprised positively. However, earnings growth stands modestly at less than 2%y/y.
Today, the domestic focus will be on the release of NZ CPI at 10.45 (NZT). We are expecting 0.5%q/q, in line with market expectations. This result would be unlikely to shift market expectations for RBNZ rate hikes that currently sit at just 12bps for the year ahead.
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