By Kymberly Martin
NZ swap yields inched a fraction higher following the solid QSBO release yesterday. Yields remain at the upper end of ranges.
The market continues to price around a 15% chance of a RBNZ cut by mid next year, as insurance against the possibility of domestic or global deterioration.
NZ bond yields slipped a further 1-2bps, pushing swap-bond spreads a little wider.
The first DMO auction of the year will take place on Thursday, helping to ease some of the current inherent tightness in NZ bond markets.
Yesterday morning, in his scheduled speech, US Fed Chairman Bernanke gently pushed back on the recent hawkish reading of the Fed’s December minutes. “…but I want to be clear that while we’ve made some progress there is still quite a way to go”.
US 10-year bond yields have slipped a little lower into their long-established ranges, yielding 1.83%.
The market remains steeled for a bitterly fought debate over the necessary step to raise the US debt ceiling.
Today, January data showing non-resident holding of NZ bonds will be released. Over the past year these holdings have been on a gradual uptrend, to sit at 62.7% currently.
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