The global bond market sell-off of October paused for breath on Friday, with little change in global rates.
Germany’s 10-year rate was flat at 0.17% (still up 17 bps for the week) and the UK 10-year rate was 1 bp at 1.26% (up 17 bps for the week).
The US 10-year rate was down 1 bp at 1.85%, after earlier reaching a 5-month high of 1.88%, while the 2-year rate fell by 3 bps to 0.85%. The latter fell late in the NY trading session after headlines emerged of the FBI reopening its investigation of Hilary Clinton’s use of a private email server. This was seen to increase the chance of a Trump victory, the risk of some chaotic market conditions post-election and therefore a slightly reduced the chance of the Fed tightening ahead.
Earlier, the release of Q3 US GDP data didn’t cause any sustained market reaction, with the market recognising the weak underbelly to the slightly stronger-than-expected headline result.
The NZ yield curve steepened on Friday, with higher global rates driving up the long end, and short end rates contained by the prospect of further monetary policy easing. The 2-year swap rate was flat at 2.15% while the 10-year rate rose by 7 bps to 2.85%, its highest close since June. The 10-year government bond rate rose by 6 bps to 2.71%, its highest close since May and taking the month-to-date increase up to 45 bps.
There is plenty of news this week to digest. On the policy scene, the RBA, Fed, BoJ and BoE will all be providing updates, with none expected to change any settings. The Fed is expected to keep alive the prospect of a December rate hike. There are numerous data releases, with Friday night’s US non-farm payrolls report the highlight, and preceded by ISM manufacturing and non-manufacturing ISM releases on Tuesday and Thursday night respectively.
The local highlight will be Wednesday’s labour market data. Today we’re be watching the ANZ business outlook survey to see what follows September’s very strong activity and confidence indicators. The inflation expectations indicator is likely to remain on the soft side, close to September’s 1.4% reading.
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Jason Wong is on the BNZ Research team. All its research is available here.
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