By Kymberly Martin
Following offshore moves, NZ swaps closed down 3-4bps yesterday.
Overnight, US 10-year yields pushed up from 2.61% to 2.64%.
NZ swaps followed offshore yields lower yesterday. The 2-10s swap curve flattened slightly, to 96bps.
Lower yields are drawing in pay-side interest from both the mortgage book and corporate sector.
With no data scheduled domestically today the market will await tomorrow’s CPI reading. Consensus is looking for a 0.5%q/q read (1.7%y/y). We anticipate a 0.4% (1.6%) read. This would likely limit any rebound in yields ahead of next Thursday’s RBNZ meeting.
It was a quiet day in NZ bonds markets yesterday, with the yield on NZGB23s closing down 2bps, at 4.56%.
Today we have a significant chunk of NZGB coupon payments due which should help demand at Thursday’s DMO auction of $200m of nominal bonds.
Overnight, equities responded positively to a better than expected US retail sales report, while Treasuries sold off. US 10-year yields rose from 2.61% to 2.64%.
Today, the focus across the Tasman will be the release of the RBA April Minutes. The Bank will likely express comfort with its current neutral stance. However, its views on economic momentum, housing and the exchange rate will be scrutinised.
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