Solid US data helped nudge US long-yields higher. As US 10-year yields rose from 2.56% to 2.61% the US curve steepened

By Kymberly Martin

It was a relatively quiet end to the week in NZ markets, although NZ bond yields pushed higher across the curve.

On Friday night US 10-year yields pushed up from 2.56% to 2.61%.

On Friday, August food price data added to evidence that near-term inflation is subdued, and the RBNZ can afford to wait before hiking rates again.

Nationwide house price appreciation was also shown cooling to 4.8% in August from 5.9% in July.

Overall, moves in NZ swaps were limited as the market consolidated after Thursday’s RBNZ meeting. 2-year swap closed up 2 bps at 4.06%, while 10-year closed up 1 bps at 4.69%. We continue to see short-end swaps being fairly range-bound in coming months while the RBNZ remains on hold until March, at least.

Meanwhile NZ bond yields pushed higher by 2-4 bps across the curve. This has taken the spread between NZGB23s and swap below 38 bps, a level we would position for widening.

On Friday night, solid US data helped nudge US long-yields higher. As US 10-year yields rose from 2.56% to 2.61% the US curve steepened. Yields are now at their highest level since early-July.

Over the weekend, China released data showing August industrial production to be below expectation. This may dampen any push higher in yields at the start of the week.

Otherwise the offshore focus this week will be the US FOMC meeting earlyThursday morning (NZT). Domestically, Thursday’s 2Q GDP release will be key. Today, we will ease into the week with the release of the NZ PSI.