By Kimberly Martin
NZ swap and bond yields closed flat, to down 1 bps across the curve, ahead of today’s RBNZ meeting.
NZ 2 and 5-year swap sit at 3.93% and 4.55% respectively. The market prices almost a 100% chance of a 25bps hike today. That is consistent with our own view.
Clearly any deviation (no hike, or 50bps) would see a huge response from the market.
The yield on NZ 10-year bonds sits at 4.61%, still at the lower end of the 4.50%-5.10% range that we expect to sustain in the year ahead.
NZ-US and NZ-AU 10-year spreads currently sit at 187bps and 54bps respectively.
These spreads are also at the lower end of ranges that we expect for the coming 12 months.
Overnight, there was a dearth of data releases.
While tensions surrounding the Ukraine remain high, ‘safe haven’ bonds remain in demand.
The yields on German and US 10-year bonds slipped around 4bps overnight. US yields sit at 2.73% this morning.
Today, it will be all about the RBNZ meeting domestically (9am).
It will also be an important day across the Tasman with the release of the AU employment report.
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