By Kymberly Martin
It was a relatively quiet day in NZ markets. Yields mostly closed down 1-2bps.
In the absence of key domestic data releases and the backdrop of a US public holiday the market lacked much vigour.
Given the lack of progress in the US fiscal crisis over the weekend, NZ yields opened the week a little lower.
NZ 2 and 5-year swap closed at 3.52% and 5.07% respectively. We still see 5-year swap as being the relatively expensive part of the curve. We see better ‘value’ in 2 to 3-year swap, based on our forecast OCR trajectory. The 2-10s swap curve remains steep at 155bps.
NZ bond yields closed down around 2bps across the board, but remain fairly attractive on a global basis. Excluding Portugal and Greece (which remain in a category of their own), NZ 10-year bonds continue to offer the highest yield relative to developed market peers.
Overnight, as the US bond market was closed for Columbus Day, other markets showed little direction. German 10-year bond yields tracked sideways below 1.86%.
Today, there are no domestic data releases. However, keep an eye out for a scheduled speech by the RBNZ’s deputy Governor on the NZ housing market.
It’s clear the RBNZ will not be content until the steam is taken out of the housing market, particularly in Auckland.
Across the Tasman the focus will be on the RBA’s October Minutes.
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