US Treasury rates drifted lower, with the market becoming more convinced that the Fed is in no hurry to raise rates.
US 2 year and 10-year rates are both down 2 bps to 0.71% and 1.76% respectively. The latter has traded in a tight 4 bps range overnight.
We see a 1.7-2.0% range containing US 10-year yields over the near term, with a break higher in the second half as Fed Fund hikes become more likely.
Yesterday in local trading there was a slight upward bias to rates, essentially following offshore moves post US non-farm payrolls data. The 2-year swap rate rose by 1 bp to 2.165%, while the 10-year rate rose by 3.5 bps to 2.86%.
NZ government bonds remained well supported with the 10-year rate “only” up by 1 bp to 2.62%, remaining close to record low levels.
The NZ-US 10-year spread has compressed notably, and at around the 85 bps level is the lowest in about a decade. This reflects investors’ current thirst for yield and the different monetary policy outlooks in the US versus NZ.
It should be another quiet trading session for the day ahead. Inflation indicators in China are the only local highlight, with second-tier NZ data of little interest to most of us. It should also be a quiet trading session tonight.
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Jason Wong is on the BNZ Research team. All its research is available here.
2 Comments
NZ government bonds remained well supported with the 10-year rate “only” up by 1 bp to 2.62%, remaining close to record low levels.
Are collective taxpayers once again at risk of watching helplessly while more wealth is transferred offshore to those that really own our Government debt?
When will they learn? - you cannot suppress interest rates and bond prices at the same time
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