By Kymberly Martin
It was a quiet day to end the week in NZ fixed interest markets. US 10-year yields ended the week at 2.70%.
NZ swaps closed down 2bps across the curve with 2 and 5-year at 2.51% and 4.41% respectively. The market prices a 75% chance of a 25bps OCR hike by March next year and over 100bps of hikes by the end of 2014. We continue to see 125bps of hikes by the end of next year.
Across the Tasman, the market still prices a small (28%) chance of a further RBA rate cut by mid next year. Thereafter the market prices a fairly quick turn in the rate cycle.
The market prices a 65% chance the cash rate will be 25bps higher than current by the end of 2014. By contrast, our NAB colleagues see the cash rate, being at, our below, current levels until 2H 2015.
On Friday night, after disappointing US data releases, US 10-year yields dipped from 2.73%- 2.69%, but closed the week above 2.70%.
Today, the PSI will be delivered. We are hopeful this can hold up as well as last week’s stellar PMI reading. Otherwise it’s a relatively low-key week on the domestic data front.
Wednesday’s PPI will be interesting for what it reveals about NZ inflation rebounding from a low base.
Wednesday morning will also bring the latest dairy auction and the afternoon, the now closely watched mortgage approvals data.
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