By Kymberly Martin
NZ yields closed little changed yesterday, though the curve was slightly steeper.
The 2s-10s swap curve closed at 104bps, now 10bps off last week’s lows. We anticipate further steepening.
On either side of the Tasman there was only limited reaction to the key data releases of the day, the NZ QSBO and the AU NAB business confidence survey.
The market continues to price around another 90bps of cuts from the RBA by a year’s time, and 16bps from the RBNZ. We feel both expectations are a little aggressive, though our NAB colleagues do now expect a further RBA cut in November (with risks of a further cut in early 2013).
Overnight, risk appetite eased a little further and equity markets were soft. US and German ‘safe haven’ 10-year bond yields fluctuated around 1.70% and 1.48% respectively.
Spanish spreads were a little wider as the market digests Spain’s reluctance to apply for financial assistance.
In the day ahead the NZ crown accounts will be published for the fiscal year to June 2012. We anticipate net debt to be close to plan, at around 25% of GDP.
While net debt/GDP remains on a rising trend (which the government hopes to cap by returning to surplus), it remains well below most developed market peers.
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.