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US treasury yields fall sharply; NZ govt stock curve flat; global hunt for yield sees NZ bonds benefit; Greek govt bonds yielding below 9%

Bonds
US treasury yields fall sharply; NZ govt stock curve flat; global hunt for yield sees NZ bonds benefit; Greek govt bonds yielding below 9%

By Kymberly Martin

Some slight further flattening of the NZ curve occurred yesterday. Overnight, US 10-year yields slid from 1.90% to 1.81%.

Yesterday, NZ swaps initially opened a little higher and steeper. We are beginning to see some corporate paying interest at the longer-end of the curve, given curve flatness. However, the moves did not sustain and swaps closed lower across the curve.

NZ 2-year swap still remains quite sticky and declined less than 1bps, to close at 3.77%. However, 10-year declined a further 2bps, to 3.88%.

Within NZ Government bonds the yield on NZGB27s also declined 2bps to 3.53%. The entire NZGB curve is now incredibly flat with the highest point only 3bps above the OCR. The global hunt for yield is also seeing the likes of LGFA bonds benefit, with their spreads crunching in relative to NZGBs.

Overnight, US 10-year yields dropped sharply after the release of US Dec retail sales data (-0.9% m/m vs. -0.1% expected). From 1.86% prior to release yields fell toward 1.78% before returning to trade around 1.81% currently.

Yields are now lower than during their ‘flash crash’ in mid-October last year. Meanwhile German equivalents trickle along at historic lows, close to 0.42%. Despite Greek elections now being less than a fortnight away, Greek 10-year yields also continue to decline. They are now below 9.0%, after heading toward 11% earlier this month.

Across the Tasman the focus today will be on AU employment data. Ahead of this, the market prices around 42bps of cuts from the RBA over the coming 12 months. This is not far from our NAB colleagues’ expectation for 50bps of cuts.

Daily swap rates

Select chart tabs

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

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1 Comments

Looking at the slump,in swap rates in the chart above banks should soon be offering 4,5 and 7 year fixed mortgage rates of 5%

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