By Kymberly Martin
NZ swaps closed down 2 bps across the curve yesterday.
Overnight, US 10-year yields traded down from 2.20% to 2.14%.
The bias was for lower swaps for most of the day yesterday.
The move was quite even across the curve with 2-year closing at 3.58% and 10-year at 3.92%.
Ahead of tomorrow morning’s RBNZ meeting the market is pricing around a 70% chance of a rate cut by year-end, although little chance of a cut tomorrow.
We think the RBNZ will play a very steady hand tomorrow, emphasising the OCR is on prolonged ‘hold’.
This afternoon the LGFA (Local Government Funding Agency) will auction NZ$160m of bonds including NZ$100m of its new 2027 maturity bond.
As the ECB has started its bond purchase programme this week and Italian data disappointed overnight, German yields fell to new historic lows. From 0.32%, German 10-year yields have traded down to 0.23%.
In the absence of key US data releases, US yields followed suit.
As equities fell, US 10-year yields traded down from 2.20% to 2.14%.
This will likely result in flattening pressure on the NZ curve today.
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