By Kymberly Martin
NZ yields closed little changed yesterday. Overnight, there was a lack of key data points.
The market appeared to still be focused on the earlier messages from incoming Chair Yellen. She is seen as providing continuity to the policies set in place by Bernanke, but potentially setting even stricter labour market criteria to be achieved before withdrawing monetary accommodation.
In the backdrop of gains in equity markets, US benchmark 10-year bond yields drifted lower to sit at 2.67%. German equivalents slipped from 1.71% to 1.68%.
Today the RBA will release the minutes from its November meeting. For now 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 AU 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.
NZ yields will likely open down given the moves seen offshore overnight, mimicked in AU bond futures.
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