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Fed raises expectations of a September rate hike. NZ swap rates take a 'sour tone' into today's labour market report

Bonds
Fed raises expectations of a September rate hike. NZ swap rates take a 'sour tone' into today's labour market report

By Raiko Shareef

NZ interest rates fell yesterday, in sympathy with the rally in global bond yields.

US bond yields pushed off multi-month lows, as investors were put on notice for a September Fed Funds Rate hike.

NZ swap yields fell by 2 bps to 4 bps, led by the longer end, after US bond yields drifted to two-month lows on Monday night.

Rates seem supported at the shorter end of the curve, as investors exhibited some reluctance to materially shift their outlook for NZ monetary policy, ahead of the dairy auction and the labour market report.

US 10-year bond yields drifted off their 200-day moving average (at 2.14%) through the session, helped by a stabilisation in oil prices. But the sell-off accelerated after hawkish comments from Atlanta Fed President Lockhart. The 10-year yield currently sits 7 bps higher at 2.22%.

The poor result from Fonterra’s GlobalDairyTrade auction overnight will add a sour tone to early trading in NZ rates markets, ahead of the labour market report. Our expectations for that report are similar to consensus.

We forecast the unemployment rate to rise marginally to 5.9%.

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Raiko Shareef is on the BNZ Research team. All its research is available here.

Daily swap rates

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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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