By Kymberly Martin
NZ swaps closed down 2-4bps across the curve on Friday. 2-year closed at 2.91% and 10-year at 4.11%.
The curve flattened slightly, back to 120bps, the top of the range that has held for most of the past nine months.
NZ bond yields closed down 3-5bps. We believe NZGBs continue to look quite expensive relative to both offshore (AU/US) counterparts, and NZ swap.
However, the key to the NZ bond market in coming weeks will be the impact of the new 2020 bond, to be under syndication in mid-April.
The $2b deal will serve to lengthen the duration of the NZ bond curve, as it coincides with the maturity of the NZGB 2013 bond.
On Friday night, US 10-year yields ultimately closed little changed at 1.93%.
Heading into Easter, it will be a curtailed week for New Zealand markets. The highlight will be Wednesday’s ANZ business confidence survey.
Key will be the increasing toll of the drought on the rural sector, relative to areas such as construction that are going from strength to strength.
On the global front there is an array of Fed-speak to look out for this week. Tonight and Wednesday, Italy returns to markets to sell sovereign bonds.
This should act as a good barometer of appetite for this politically-strapped country.
However, news over the weekend suggests leaders may be inching toward a compromise government. Italian 10-year bond yields retreated 7bps on Friday, as a sign of increasing confidence.
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