By Kymberly Martin
The NZ curve flattened on Friday.
On Friday night, US 10-year yields fell after the payrolls report to end the week at 2.15%.
On Friday, NZ swaps followed the late session fall in offshore bond yields the previous night.
NZ 2-year swap closed down 2 bps, at 3.43%, while 10-year closed down 5 bps at 3.96%. This resulted in the 2-10s swap curve flattening to 53 bps.
As previously noted, the NZ curve has steepened a little faster than we had an anticipated to levels we see trading in H2.
We expect some consolidation will likely now occur, especially after a further pullback in US yields on Friday night. A 35-55 bps range seems plausible.
US 10-year yields gapped from above 2.19% to below 2.12% on the US payrolls release, as he market honed in on the subdued earnings growth numbers.
Yields subsequently consolidated, to end the week at 2.15%.
This will likely maintain ‘bull’ flattening pressure on the NZ curve today.
It is a relatively quiet start to the week domestically with only NZ card spending data due.
Tonight, the Bank of England will meet, though no change of policy is expected. The market now prices only an 80% chance of a 25 bps hike from the BoE by July next year.
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