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German IFO confidence weaker, bond yields lower, Draghi confirms more stimulus announcements soon, eyes on NZ trade data

Bonds
German IFO confidence weaker, bond yields lower, Draghi confirms more stimulus announcements soon, eyes on NZ trade data

By Kymberly Martin

It was a relatively quiet start to the week in NZ markets with swaps closing down around 2 bps across the curve.

Overnight, US 10-year yields traded a tight range.

The weekend’s speech by US Chair Yellen provided little direction for the NZ market at the open this week. In addition, there was an absence of local data releases.

Overall, NZ bond yields closed little changed while swaps closed down 2 bps across most of the curve.

2 and 5-year swap sit at 4.06% and 4.66% respectively.

Overnight, while Eurozone equities surged, German bond yields opened lower. Both were probably spurred by ECB President Draghi’s Jackson Hole comments that further stimulus was on its way.

In addition, the German IFO survey was a little below expectation but not sufficiently weak to seriously threaten growth expectations.

German 10-year bond yields dipped to new all-time lows below 0.93% before clawing their way back to 0.95% this morning.

US 10-year yields traded between 2.41% and 2.38%, sitting around the middle of this range at present.

Today, the NZ trade balance will be released as one of the domestic highlights this week.

We expect this to show a hefty $NZ979m deficit (consensus $NZ475 deficit). This may embolden receivers who are attracted by the carry on offer on NZ swaps and believe domestic economic momentum is slowing.

However, we continue to believe NZ 2-year swap is attractive for those borrowers wishing to hedge, near 4.0%.

 
 
 
 
 
 
 
 

Daily swap rates

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Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA

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