By Kymberly Martin
It was a fairly quiet start to the week in NZ rates markets. Overnight, US 10-year yields slipped after soft US durable goods orders.
NZ swaps closed down 1-2bps across the curve. 2-year swaps closed at 3.44%, and the spread to the AU equivalents narrowed a fraction to 67bps.
There appears to still be steady paying coming through from the mortgage sector of the economy.
Given recent rises in fixed mortgage rates we would expect this to diminish, though it appears for now there is still an overhang to be cleared.
NZ bond yields closed down 4bps across the curve, following Friday night’s offshore moves.
NZ 10-year bond yields sit at 4.63%, with spreads to US and AU equivalents at 184bps and 63bps respectively.
We would not be surprised to see some demand for NZ bonds returning at these levels, though the market may retain some reticence in the uncertain run-up to the September US FOMC meeting.
Overnight, the market demonstrated its recent heightened sensitivity to individual data points. Early this morning US July durable goods orders disappointed expectations. Benchmark bond yields dropped in response.
German 10-year yields fell from above 1.92% to 1.89%, while US equivalents fell from 2.83% to below 2.79%, before inching back up to 2.80%.
Meanwhile, in Europe, peripheral European spreads to German bonds have widened, as Italy prepares to auction bonds for the first time since July.
Tensions also surround the political future of former Italian P.M Berlusconi. Italian-German 10-year spreads, at 249bps, are now 18bps above their lows of just over a week ago.
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