A typically quiet pre-payrolls Friday for the local market, with small declines at the longer end, thanks to the rally in US Treasuries on Thursday.
A strong US payrolls report saw global yields jump higher.
NZ swap yields drifted lower in sympathy with global rates on Friday, with the 10-year yield shedding 2 bps to 4.08%. The 2-year yield remains firmly within the familiar 3.30% - 3.40% range, ahead of this week’s crucial RBNZ policy decision.
US interest rates rose sharply in the wake of a very impressive payrolls report, which will encourage investors looking for a September lift-off from the Fed.
To reinforce that message, Bill Dudley, president of the influential New York Fed, noted that he will likely vote to raise policy rates in 2015, should the labour market continue to improve and inflation expectations remain well-anchored. The latter condition is worth noting, as it suggests the Fed does not need to see inflation rising from current (relatively subdued) levels before it hikes rates.
Australian markets are closed for the Queen’s Birthday public holiday, which will likely spell a sluggish start for local rates markets.
Aside from the RBNZ meeting, the handful of Australian releases this week will capture local investor interest: the NAB survey (Tue), the labour market report (Thu), and a speech by RBA Governor Stevens (Wed).
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Raiko Shareef is on the BNZ Research team. All its research is available here.
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