By Kymberly Martin
NZ swaps closed up 4 bps across the curve yesterday, while NZ bond yields closed up 5-9 bps.
Overnight, US 10-year yields traded choppily around 1.89%.
NZ swaps took their cue from AU equivalents yesterday. Upward moves in the morning were exaggerated after the firmer than expected AU employment report. As AU 2-year swap gapped from 1.99% to 2.07%, NZ swaps were dragged higher.
NZ 2-year swap closed up 4 bps, at 3.53% while 10-year closed at 3.71%. The market has reduced its expectations for both RBA and RBNZ rate cuts following the data. Our NAB colleagues believe the data reduced the odds of a rate cut at the May meeting.
Meanwhile, NZGBs also sold off quite heavily yesterday after the completion of the NZGB index extension the previous day. However, a strong tender of NZGB2027s in the afternoon saw the long-end NZGBs rally into the close. On the day, NZGB19s closed up 9 bps while 2027s closed up 5 bps.
Overnight, US yields briefly got a boost from a stronger than expected Philadelphia Fed business survey. However it did not endure. From intra-night highs above 1.92%, US 10-year yields have drifted back down to 1.87%.
Fed speakers were once again out in force in the early hours of this morning. Fischer gave the more hawkish tilt saying that markets can’t depend on the Fed staying on hold forever. However, Lockhart was more concerned about seeing labour market slack absorbed and would prefer a later date for Fed rate “liftoff”, though June is still on the table. Rosengreen also seemed inclined to delay, saying inflation remains “stubbornly” below the Fed’s 2% goal and data needs to improve before the Fed raises rates. The debate is alive and well. The latter comments may have assisted the drift lower in US yields in the early hours of this morning.
Meanwhile, German equivalents are plugging new historic lows below 0.08%.
The local data agenda is fairly empty today, with tonight’s offshore focus likely to be CPI readings in both the Eurozone and the US.
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