NZ rates markets ignored Monday night’s sell-off in global bonds to finish largely unchanged yesterday.
European bond yields surged higher overnight, in part thanks to optimism around a Greek deal, as well as a higher-than-expected inflation print.
Local interest rates markets were very subdued, as is typical on RBA policy decision days. Interest to receive NZ rates continues to keep a lid on yields, in the face of rising yields globally.
The 2-year swap yield drifted 1 bp higher to 2.35%, still at the bottom end of the recent range.
German 10-year bond yields jumped higher by a stunning 19 bps to 0.71%, helped by euro-zone core CPI inflation quickening by more than expected to 0.9% y/y.
This will have investors wondering whether the ECB might decide to pare its bond purchase programme before the current September 2016 end date. But with the recovery still fairly tentative, we imagine that ECB President Draghi will pour cold water on any such suggestion at tonight’s press conference.
The sell-off in European bonds dragged global peers higher, with the US 10-year yield up 9 bps to 2.26%.
Today’s local ANZ commodity price index may give some impetus to NZ rates markets, though any gains will likely be ignored in light of last night’s dairy price declines.
In our session, Australia’s GDP report is more likely to be a market-mover. Our NAB colleagues expect a 0.7% q/q gain.
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Raiko Shareef is on the BNZ Research team. All its research is available here.
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