The NZ curve steepened a little further on Friday. On Friday night, US 10-year yields slipped, to close at 2.26%.
On Friday, NZ swaps initially pushed higher on the back of the previous night’s moves offshore. However, these moves at the short-end soon reversed as NZ swaps followed AU equivalents lower.
NZ 2-year swap closed down 1 bps, at 3.07%. The 2-10s curve steepened fractionally to 81 bps.
By contrast, NZGB yields declined across the curve, resulting in wider swap-bond spreads. NZGB27s closed down 5 bps, at 3.64%.
The DMO announced its issuance plans for calendar Q3 (fiscal Q1). Overall, NZ$1.2 bln of nominal NZGBs will be offered and NZ$300 mln of IIBs. The DMO has also taken the unusual step of announcing precisely which bond maturities it will offer at each auction (NZGB 2020 and 2027 maturities and IIB 2035).
The broad theme of relative supply constraint remains, as the Government inches its way back to operating surplus. However, it is worth remembering the DMO has indicated it will also likely issue a new 2033 nominal bond in the first half of the fiscal year.
On Friday night, in the absence of key US data releases, US 10-year yields traded lower into weekend. At 2.26%, yields sit toward the lower-end of our expected near-term trading range of 2.25%-2.50%. However, if Greek concerns continue to linger/deteriorate this week, yields could well dip lower, before any rebound. Tonight will bring the emergency summit to discuss Greece’s predicament. Leaked information suggests Greek PM Tsipras had been in emergency phone calls over the weekend with Eurozone leaders, seeking a “definitive” solution.
Lingering uncertainty will likely keep NZ long-end yields subdued today.
The key data for the short-end today will be NZ migration figures. The RBNZ has been watching this data closely, as historically high net migration has added to GDP growth and demand for housing.
---------------------------
Kymberly Martin 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.