By Kymberly Martin
US Treasury yields pushed lower yesterday in the aftermath of a more cautious set of US FOMC minutes.
This reaction set the tone for NZ interest rate markets in our session. Overnight, Treasury yields have recovered some of their losses.
On the release of the FOMC’s January minutes, market participants zeroed in on this particular paragraph: “Many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time”
This had the effect of pushing money market yields lower, with odds of a Fed Funds Rate hike in June or July dropping from 64% to 54% immediately after the release.
US 10-year Treasury yields fell 8 bps to 2.05%.
As a result, NZ interest rates opened lower. At these subdued levels, though, interest to pay fixed rates among the local community remains apparent. The 2-year swap yield closed 3 bps lower at 3.60%.
Overnight, US Treasury yields have recovered somewhat from their post-FOMC lows. They remain relatively impervious to continued US data disappointments, such as the Philly Fed Index’s shortfall last night.
In addition, the market appears remarkably sanguine about the prospect that Greece might not reach an agreement with its creditors.
Another meeting of eurozone finance ministers is scheduled for tonight. We suspect the outcome there will be the main driver of market sentiment heading into the weekend.
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.