By Kymberly Martin
There was little action in the NZ market yesterday.
Overnight, US yields slipped a fraction, with 10-year yields at 2.47% this morning.
The swaps market showed little response to the previous night’s weak dairy auction, or to yesterday’s labour market report.
Overall, in our view, the report showed a tightening labour market consistent with rising inflationary pressures and a requirement for the central bank to, eventually, continue progressively raising interest rates.
But there is no urgency for them to do so, so the market’s fairly muted response was justified.
NZ 2 and 5-year swaps sit at 4.08% and 4.47% respectively, while the 2-10s curve sits a little steeper at 66 bps.
Disappointing Eurozone data delivery overnight set German bond yields into decline. 10-year yields fell from 117 bps to 110 bps, new historic lows.
US equivalents touched intra-night lows below 2.44% before rebounding following the release of US trade data. This showed the monthly trade deficit declined to a five-month low of $41.5 bln in June. This suggests 2Q GDP growth estimates will need to be revised higher.
Today’s local highlight will be the AU employment report.
Tonight the ECB and BoE meet though neither is expected to announce any policy changes, as the ECB remains in ‘wait and see’ mode after previous policy announcements.
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