By Kymberly Martin
NZ swaps closed down another 3-5bps on Friday.
Despite a solid BNZ PMI delivery the market continued to par back RBNZ rate hike expectations following Thursday’s meeting. 2-year closed at 2.87% and 10-year at 4.14%, a mild flattening of the curve.
Bond yields also closed down 4-6bps after a well received DMO tender. The $200m of bonds attracted an average 6.7x bid-to-cover ratio. Bonds rallied after the auction, into the close.
On Friday night, US 10-year bonds also rallied after the release of a weaker-than-expected University of Michigan consumer confidence survey. (71.8 vs. 78 expected).
Yields fell from 2.04% back to 1.99%, further consolidating the top of their range.
Markets will likely respond in ‘risk off’ mode today, following the Cyprus news over the weekend.
Combined with the slip in US long yields already seen on Friday, we would expect downward pressure on the NZ curve today.
This should override any impact of local PSI and consumer confidence releases today.
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