Declining yields the feature of most bond market activity, pushed that way by chronic geopolitical pressures

By Kymberly Martin

The NZ swap curve flattened on Friday. On Friday night, US 10-year yields dipped to 2.34%.

NZ 10-year swap declined 4 bps, to 4.64% on Friday, while 2-year remained fairly steady at 4.05%. The 2-10s curve has therefore pushed back towards recent lows of 59 bps.

On an outright basis, NZ 10-year swap is now at its lowest level since early-August last year.

Following on from the strong NZGB tender on Thursday, NZ bond yields also ground lower on Friday, also following offshore moves.

The yield on NZGB23s declined 4 bps, to 4.15%. This is its lowest level since late-July last year.

US 10-year yields dipped to new lows since June last year, at 2.34%. A disappointing US University of Michigan Consumer Confidence survey early Saturday morning had set the tone toward lower yields. However, geopolitics was the proximate cause of yields breaking lower.

Given these offshore moves and follow through in Aussie bond futures, it seems downward pressure will remain at the long-end of the NZ curve at the start of the week.

There is little on the domestic agenda to curtail the move. The BNZ July PSI will be released today. While it is expected to be solid it is unlikely to be market moving.