By Kymberly Martin
The NZ curve steepened a little on Friday.
On Friday night, US yields suffered post-payrolls volatility but yields ultimately ended the week lower. The NZ 2-year swap closed little changed at 3.83% on Friday.
Meanwhile, 10-year pushed up 3bps to 4.03%. Still, the curve remains remarkably flat and we expect corporate hedging to be enticed further out the curve as the year gets underway.
On Friday, the Kauri season got off to a strong start with an issue of NZ$550 million of NIB (Nordic Investment Bank) March 2020 bonds. This represented very strong investor demand in that the volume was much larger than initial indications.
The bonds were priced at 21 basis points over swap, which is indicatively 60bps above the NZGB April 2020. We expect continued strong Kauri issuance in the first two months of the year, as has been the seasonal trend over the past couple of years. On Friday night, it was all eyes on the Dec US employment report.
This created some initial volatility in US yields, as markets dissected the detail. Despite a better-than expected headline numbers, the market appeared to finally settle on lack of wage pressure in the data (av. hourly earnings -0.2%m/m). US 10-year yields, having pushed above 2.02% fell to end the week below 1.95%. 2-year yields declined from 0.61% to 0.56%.
It is a quiet start to the week with no domestic releases today and little data of note offshore.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.