By Kymberly Martin
NZ swaps closed flat to down 2bps yesterday. Overnight, US 10-year yields traded a relatively tight range to sit at 1.99% at present.
NZ swaps initially pushed lower on the open following the post-Yellen-comment-moves offshore. However, the move was not sustained as payers were drawn into the market. Overall NZ 2-year swap closed little changed at 3.59% while 10-year sits at 3.82%.
US Fed Chair Yellen’s further testimony overnight did not seem to provide rates markets with anything new. US 10-year yields traded in a range between 1.96% and 2.00% for the night. Fed fund futures price a 0.485% cash rate by year-end.
Meanwhile in the Eurozone, German 10-year yields slumped from 0.37% to 0.32%, back toward historic lows, as peripheral Eurozone yields pushed higher. The market is well aware the Greek tragedy still has many acts to play. Greek 10-year bonds pushed up from 8.61 % to 8.86% overnight, as the likes of Italian-German spreads also widened.
Today’s domestic data may provide further colour to what extent net migration is helping offset relative tightness in the local labour market, helping reduce inflationary pressures. The RBNZ has been watching these data closely. AU capex data will also be important. Any signs of unexpected weakness would likely see some contagion to the NZ market, with increased expectations for RBNZ rate cuts. At present the market prices around a 70% chance of a 25bps cut in the year ahead.
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.