BNZ picks the 2yr swap rate to push on up to 4% "at least"; Greek negotiations off to a rocky start

By Kymberly Martin

NZ swaps pushed higher by 4 bps across the curve, following Friday night’s offshore moves.

In a fairly light day of trading, NZ swaps pushed higher from the open following previous offshore moves.

The direction was likely also encouraged by the stellar NZ Q4 retail sales release. NZ 2-year swap closed at 3.59%.

We continue to see attractive paying value on any more back below 3.50% and ultimately see 2-year trading back toward 4.0%, at least.

Overnight, the market was particularly muted in light of the US holiday and EU and Greek official being locked in negotiations.

German 10-year yields continued to dabble around historic lows, at 0.33%, while Greek 10-year pushed up from 9.1% to 9.5%.

After the European close, headlines have announced the Greek government finds the EU proposals "absurd" and "unacceptable". The lack of resolution is unlikely to surprise the market.

Today’s release of RBA Minutes may be key in impacting sentiment locally. In recent weeks NZ rates have shown themselves to suffer contagion from events that impact on rate cut expectations across the Tasman. e.g. last week’s softer than anticipated AU employment report.

But with the market already pricing almost 50 bps of further RBA cuts it’s difficult to see the Minutes pushing the market to price significantly more.