By Kymberly Martin
NZ rates closed little changed yesterday. Overnight, US 10-year yields drifted down to 2.36%.
In quiet markets, NZ 2 and 5-year swap closed at 4.07% and 4.35% respectively, showing little response to yesterday’s QSBO release. As expected this was still pretty solid.
The detail pointed to above-middling inflation but no great urgency for the RBNZ to pull the trigger on its next rate hike. Our central forecast remains a resumption of rate hikes in March next year, obviously contingent on moves in the NZD, dairy prices and confidence.
There was little drama from yesterday’s RBA meeting. It kept its cash rate steady at 2.50%, and provided only factual, as opposed to alarmist, descriptions of the now closely watched (investor) housing market. The market continues to prices the RBA’s cash rate will be unchanged right through 2015.
Overnight, US Treasuries rallied and equities declined. The IMF trimmed its outlook for global growth in 2015, and warned of the risk of a correction in equity markets.
German industrial production fell sharply in August (-4%m/m vs. -1.5% expected). Surprisingly, despite this, German yields managed to claw their way off their lows. US 10-year yields declined, however, to 2.36%.
There is a fairly quiet agenda in the day ahead. In the early hours of tomorrow morning the US Fed will release the Minutes from its September meeting.
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