By Kymberly Martin
NZ swaps closed up 1-4bps across the curve. Overnight US 10-year yields slumped from 2.70% to 2.62%.
There was a fair amount of activity in the swap market yesterday.
Swaps pushed higher as the BNZ manufacturing PMI printed at 58.4, stronger again, from 56.2 previously.
Corporate payers are starting to be attracted to the longer end of the curve. NZ 10-year swap that had reached the bottom of its three month range, below 5.00%, now sits at 5.03%.
The stronger than expected AU employment report also helped NZ yields to continue pushing higher.
While 2-year closed up 1bps at 4.07%, 10-year closed up 4bps, resulting in a slight steepening of the curve.
The unexpected decline in the AU unemployment rate (5.8% from 6.0%) saw AU swaps push higher. AU 3-year swap popped from 3.24% to 3.30% on the release, before closing at 3.27%.
Overnight, in fairly jittery markets, US Treasury yields fell as equity markets slumped. The yield on US 10-year bonds declined from 2.70% to 2.62%, toward the bottom of well-trodden ranges.
Greece returned to markets overnight to sell Government bonds for the first time since the Eurozone crisis. In a sign of improved confidence, €3b of bonds were sold, more than the Government estimated. The 5-year bond was sold at a yield of 4.75%. This is quite striking considering the next highest 5-year bond yield, amongst developed market peers, is NZ’s at 4.26%. Recall Greece’s debt to GDP ratio remains close to 160%, while NZ’s is below 30%.
We expect NZ yields may open down given the sharp moves in US Treasuries overnight.
The March data of non-resident holdings of NZGBs will be released today. As of February these stood at 63.3%.
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