By Kymberly Martin
On the back of improved global sentiment NZ yields gapped higher at the open yesterday. NZ 2-year swap yields opened up 10bps but then drifted lower over the course of the day to close up 6bps.
At 2.84% they now sit just below key resistance levels. The 2s-10s curve has steepened to 100bps. We expect a steepening bias to be maintained, especially if the more positive global mood runs a little further.
NZ bond yields rose 9-10bps on the day. NZ 10-year bond yields closed around 3.62%. Spreads to US and AU equivalents yields now sit at 205bps and 34bps respectively.
Overnight, the global mood remained positive but without the same exuberance seen on Friday. US and German 10-year yields are slightly lower at 1.54% and 1.40% respectively.
However, non-core European sovereign bond spreads have managed to continue narrowing. As the market expects the ECB will focus its bond buying at the short end of the curve, Spanish 2-year bond yields continue to plunge.They fell another 50bps yesterday to 3.50% from as high as 6.60% a fortnight ago.
Today, the local focus will be the RBA cash rate announcement. We expect no change in the cash rate. We will look to today’s accompanying RBA statement for suggestions that its rate cutting process may be moving into its final stages. The next key NZ data will come on Thursday with the employment report.
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.