In a day with lots of news hitting the market, the US 10-year Treasury rate ended Friday unchanged at 1.77%, after trading in a tight 5 bps range of 1.76-1.81%.
The general global tone was “risk-off” with equity markets outside the US selling off and oil prices falling 4%, but US-centric news meant “risk-on”.
In the end, the market was probably confused by it all and unchanged rates was a fair outcome.
The market tried to sell off on the healthy employment report and higher ISM figures, but the global backdrop was enough to ensure little change overall. The week ended with the Dec-2016 Fed Fund rate priced at 0.56%, implying about 19 bps of rate hikes priced into the curve this week, obviously less than a full 25 bp hike.
Higher global rates during the local trading session on Friday, inspired by the stronger China PMI figures, pushed up the NZ yield curve.
The 2-year swap rate ended 1 bp higher at 2.21% and the 10-year rate ended 3 bps higher at 3.02%. There wasn’t a lot of trading going on in the swap market. There seemed to be more focus on the government bond market, with the pricing of the new 2025 nominal bond.
The NZ government issued $1.5 billion of April-2025 bonds via syndication at a yield of 2.745%. This represented a spread of 28 bps over the Apr-2023 bond. The Debt Management Office said that the total book size within the initial pricing guidance range of 24-29 bps exceeded $2 billion.
Today’s trading session should be fairly quiet given little change in US rates in Friday night trading and no local
Daily swap rates
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Jason Wong is on the BNZ Research team. All its research is available here.
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