By Kymberly Martin
NZ swap yields closed down 4-5bps across the curve yesterday. 2-year swaps have pulled back from the top of ranges, closing at 2.73%. The 2s-10s curve remains around 107bps.
NZ bonds did not follow the rollercoaster that AU bonds undertook yesterday. NZ bond yields closed down just 1-2bps.
It will be an important day for bonds with the release of the Half-Yearly Economic and Fiscal Update. It will provide an update of the government’s goal to return to operating surplus by 2014/2015.
It should provide more detail on likely bond issuance in the year ahead. We expect little in the report likely to upset rating agencies’ view of the sovereign rating.
On Thursday, the last DMO tender for 3-4 weeks will take place, suggesting it should attract good demand.
Overnight, US bonds traded a tight 3bps range, showing little response to the Empire Manufacturing survey that disappointed at -8.1 (-1.0 expected).
US 10-year bonds have finished the evening little changed at 1.74%.
Today, the RBA minutes for December will be released. This will provide some more colour on the RBA’s most recent decision to cut rates by 25bps, and the prospect for further cuts. The market currently prices a further 45bps of cuts in the year ahead.
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