By Kymberly Martin
NZ swaps closed up 1 bps across the curve on Friday.
On Friday night, US 10-year yields traded a tight range around 2.11%.
It was a very quiet day in NZ swaps markets to end the week with 2-year swap at 3.58% and 10-year at 3.85%.
NZGB yields drifted higher into Friday’s afternoon’s DMO auction. The auction of NZ$300 mln of NZGB 2027s attracted an acceptable 2.1x bid-to-cover ratio. However, there was a fairly wide 5 bps range of successful bids.
The average successful yield of 3.48% was wide of pre-tender levels. Yields then pushed a little higher into the close.
On Friday night, while the University of Michigan sentiment index disappointed expectations it is notable that the survey’s 1-year-ahead inflation expectations component ticked up. From 2.8% previously it now sits at 3.0%.
However, the data did not elicit too much of a response from rates markets that were contented to drift sideways into the weekend. US 10-year yields closed the week at 2.11%.
This week will be all about Thursday morning’s (NZT) meeting of the US FOMC. The Fed is widely expected to remove the word “patient” from its statement, opening up the possibility of a rate rise at any future meeting.
We continue to expect a first hike in June.
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