A rather quiet local session meant little inspiration for NZ interest rates on Friday, which simply moved to reflect the sharp steepening in the US bond curve the previous night.
The local 10-year swap yield rose by 11 bps to 3.85%, while the 2-year rose by just 2 bps to 2.98%. The 2s10s curve steepened up to 87 bps.
Offshore, the continued improvement in risk appetite saw US bond prices fall further, with yields rising between 5 bsps and 8 bps. By Friday evening, a Greek deal seemed very achievable by Sunday night, after Greece’s government effectively rolled over on many of its red lines (sales taxes, pension reforms). But the mood is much more uncertain this morning.
Fed Chair Yellen’s closely-watched speech early Saturday morning failed to deliver any material surprises. She kept to now well-known themes: expressing scepticism that the labour market is truly as healthy as a 5.3% unemployment rate implies, but keen to initiate a tightening cycle by year-end.
On the day’s hot-button issues, she simply noted that “the situation in Greece remains unresolved”, and did not mention China.
Yellen’s semi-annual testimony to Congress will be a highlight of the week to come, but we do not expect her to give much away.
The Australian NAB survey (Tue), China’s Q2 GDP report (Wed), and the local Q2 CPI print (Thu) will likely be influential for local rates markets.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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