By Kymberly Martin
The NZ market’s response to the slightly low-side reading on CPI was fairly limited. Yields dipped around 4bps on the release before rising into the close.
At the close, swap yields were flat to down 1bps. The market continues to price that the OCR will be 17bps lower in a year’s time.
NZ inflation-linked bonds, that are fairly illiquid, showed some response to the CPI release. Yields rose 6bps, as demand for inflation protection declined.
Overnight, US Fed’s Bernanke in his testimony to Congress reiterated that the Fed stands ready to take action if necessary. US 10-year yields rose off their all-time lows to sit around 1.50% currently.
The rise in US long yields suggests some flattening pressure should come off the long-end of the NZ curve. Support on the NZ 2s-10s curve just below 100bps appears to be holding, and the curve now sits at 102bps.
There are no Australasian data releases to really drive markets today.
Tonight, Bank of England minutes will be released to shed some more light on its most recent decision to keep rates on hold at 0.50% but increase its asset purchase program by £50b.
The market will also look to Bernanke’s comments in his second day of reporting, this time to the US House.
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