By Kymberly Martin
NZ swap yields closed little changed yesterday, despite the release of the NZ QSBO survey.
There was a mild steepening of the 2s-10s curve to 104bps, as it bounced off a major support level. Near-term we see the curve biased to steepen, ahead of a prolonged ‘bear’ flattening we expect next year.
Bond yields closed little changed yesterday. Today, the focus will be on the Local Government Funding Agency tender. We expect demand to remain solid as these issues (LGFA15s and LGFA19s) still offer an 80-100bps pickup in yield over NZGB equivalents.
Overnight, markets started on a more optimistic footing. They were buoyed by comments seeping out of the EU minister’s summit regarding assistance for Spain.
Better-than-expected UK and Italian Industrial Production data also helped the mood. German 10-year bond yields moved up from 1.31% to above 1.35%.
Later in the night, the US equity market opened on a downward path taking some of the gloss off markets.
German 10-year yields drifted back to 1.32% and US equivalents have eased to 1.50%. Still, Spanish-German 10-year bond spreads managed to narrow 25bps to 549bps.
There is little data to watch in the day ahead. Tonight, the US Fed will release the minutes of their 19-20 June FOMC meeting. As always, these will be scoured for hints of further quantitative easing.
Also keep an eye out for commentary in coming days from the German Constitutional Court.
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