Treasury yields cooled their heels overnight, with the range just 5 bps, after the rather wild 12 bps the night before.
Local investors largely shrugged off the disappointing dairy auction result, instead choosing to mark rates higher in response to US rates.
The 2-year swap yield drifted 1 bp higher to 3.38%, continuing the modest rebound from the 3.34% low struck on Monday. We continue to think short-end rates have room to rise, on the basis that market pricing for near-term RBNZ rate still seem too rich.
Yesterday, we recommended paying June OIS at 3.395%.
US bond yields drifted lower through the session, with a dearth of data leaving few drivers. This morning’s release of the FOMC minutes failed to give the market many fresh clues about the Fed’s near-term path.
Today’s NZ Government Budget release will no doubt attract much commentary, but with so many policy planks flagged ahead of time, markets are unlikely to be surprised.
We note that the likelihood of a delayed return to surpluses may see a very small increase in the DMO’s bond programme.
Elsewhere, there is a very heavy data calendar over the coming 24 hours, hallmarked by the first PMI readings for May from Japan, China, Europe, and the US.
---------------------------
Raiko Shareef is on the BNZ Research team. All its research is available here.
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.