By Kymberly Martin
After the previous day’s large moves, the NZ market was fairly subdued yesterday.
Swap yields closed little changed, although there is still a decent amount of paying coming through.
However, we suspect with domestic banks raising their fixed mortgage rates, the demand to pay, from this sector, may subside.
NZ 2-year swap sits at 3.44% with 5-year at 4.37%. The 2-10s curve remains at its steepest level since March last year, at 153bps.
We believe we may be starting to see the start of some buying interest in NZ government bonds given the levels of outright yields, spreads to offshore counterparts, and spreads to swap.
The yield on 10-year bonds now sits at 4.61% or 36bps below swap.
Overnight, ahead of the release of the US FOMC minutes, US 10-year yields traded quietly around 2.82%, briefly moving as high as 2.86% on the release of strong July existing home sales data (6.5%m/m vs. 1.4% expected).
On the release of the FOMC minutes US 10-year yields initially spiked from 2.81% to 2.88% but are in the process of now consolidating (currently 2.86%).
Today, there is no data scheduled on the domestic agenda. The HSBC Chinese flash PMI will be the focus for local markets today.
22 August: CH HSBC Flash PMI; EU Flash PMIs; US jobless claims; US house prices; US Jackson Hole Summit;
23 August: EU German GDP; UK GDP; US new home sales.
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