sign up log in
Want to go ad-free? Find out how, here.

NZ bond yields fall after announcement of NZ employment numbers

Bonds
NZ bond yields fall after announcement of NZ employment numbers

by Kymberly Martin

NZ yields fell heavily yesterday on the back of NZ unemployment data. Focusing on the headline fall in NZ unemployment to 6.7% from 6.3%, NZ yields fell sharply yesterday, continuing their descent of the past 6 weeks. 2-year yields closed at 2.60% near the lows of last November.

The market is now almost fully pricing a 25bps RBNZ rate cut by early next year. We continue to believe this is unlikely though our conviction has been sorely tested in recent weeks.

For now, it is difficult to see an immediate catalyst to turn market sentiment around. The 2s-10s curve steepened a little further yesterday (143bps) as 2-year yields fell 11bps and 10-year yields 7bps.

Bond yields also closed down 9-11bps yesterday. It was another solid DMO auction with a bid-to-cover ratio of 2.3x. Bonds continued their rally after the auction, with the yield on NZGB23s closing at 3.80%. The spread to US and AU equivalent bonds has narrowed to 193bps and 27bps respectively.

It was a whippy night for “safe haven” US and German bonds. The ECB kept rates at 1% as expected, but was possibly less downbeat on the outlook than expected. Yields surged higher by around 4bps. Later, yields were knocked back to their original level after the release of a disappointing US non-manufacturing ISM (53.5 vs. 55.3 expected).

Overnight, Spain was able to meet is maximum target of selling €2.5b of bonds. In its first debt sale since being downgraded by S&P last week, the sovereign had to pay 4.04% to sell 3-year debt, up from 2.62% in March.

Rumours also swirled that an announcement on ailing Spanish banks was also imminent. This will remain in focus today. In addition, the Eurozone Services PMI is released tonight. Look out for the RBA’s statement of monetary policy released today.

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.

2 Comments

Alan Bollard may be the next Bank of England Governor!

"Britain will soon be in the market for a new governor for the Bank of England, and who better for the job than our own Alan Bollard? That was the musing in the latest issue of the Spectator, whose business editor, Martin Vander Weyer, reckoned our man would be just the ticket to succeed Sir Mervyn King next June. Not only is Bollard "an inflation-fighting economic pragmatist who ... knows how to deal with the unexpected" but his "very name suggests the stability we yearn for in monetary matters"."

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10803498

Up
0

Ship...Sore-Loser...I like it , but I'm not tied to it.

Up
0