The NZ curve closed a fraction flatter yesterday.
Early this morning, the US FOMC statement inspired volatility, with US 10-year yields now trading at 3.25%.
It was a relatively quiet day domestically as the market continues to price around 40 bps of cuts from the RBNZ in the year ahead. NZ 2-year swap closed little changed, at 3.17%. The 2-10s curve closed slightly lower at 84 bps.
After a period of consolidation we continue to see a steeper curve by year-end. We target a move above 100 bps.
Early this morning there was no smoking gun in the US FOMC statement. It was quite pedestrian in its discussion of moderate expansion in Q1. It stuck to the rule book saying it would be appropriate to raise the FFR when, “it has seen further improvement to the labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term.”
This certainly did not sound like a Bank with any sense of urgency. We stick with our view of a first hike in Sept, though risks are tilted toward later.
US 10-year yields climbed steadily from 2.32% to 2.40% ahead of the announcement. In a bout of volatility that then ensued, yields gapped back below 2.32% before returning to 2.34% currently. Longer-dated yields are likely responding to the slight downward revision to the Fed’s “dot point” forecasts for the FFR for 2016 and 2017. However, end-2015 remains unchanged at 0.625%.
Expect a flatter NZ curve at the open today.
Then all eyes will be on the release of NZ Q1 GDP. Although we are aligned with consensus and the RBNZ in expecting 0.6%q/q, there is plenty of potential for an outlying result.
---------------------------
Kymberly Martin is on the BNZ Research team. All its research is available here.
Daily swap rates
Select chart tabs
2 Comments
Then all eyes will be on the release of NZ Q1 GDP. Although we are aligned with consensus and the RBNZ in expecting 0.6%q/q, there is plenty of potential for an outlying result.
Just like the Fed, EU officials will drag their feet beyond what is reasonable in respect of lifting Russian sanctions, which will further entrench export competition in our main food markets.
The EU Council has agreed on a six-month extension of economic sanctions against Russia, according to a TASS source in Brussels. Read more
1. Casually overstating US 10-year yields by 100bps in the first paragraph
2. Why were you aligned with RBNZ's GDP forecast, other than that you aren't sure what to make of things and it's the easy move not to stick your neck out? In any case, wrong again
3. Auto-playing video ads in the body of the article itself - you have got to be kidding me. Was fun reading this site but that's me done if it continues
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.