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Lower UST yields see local rates soften. Rates drift in most markets as data flows and policymaker comments give little direction

Bonds
Lower UST yields see local rates soften. Rates drift in most markets as data flows and policymaker comments give little direction

By Kymberly Martin

The NZ market took its cue from Friday night’s offshore moves, with yields closing down 2-8 bps across the curve.

Overnight, US 10-year yields have traded a range between 2.31% and 2.35%.

The largest moves yesterday occurred at the long-end of the NZ curve. NZ 10-year swap closed down 8 bps, at 3.24%. The yield on generic NZ ’10-year’ bonds closed down 9 bps, at 3.10%.

At the short-end of the NZ curve, NZ 2-year swap closed down 3 bps, at 2.24%.

The market still prices only slightly more than a 10% chance of a further RBNZ cut within the year ahead. It prices a first RBNZ hike by mid-2018. This is aligned to our own view. By that time we believe NZ CPI will have rebounded from its current lows and be nudging toward the RBNZ’s 2% target.

In the absence of key data releases overnight or notable surprises from ECB President Draghi’s comments to the European Parliament, core yields traded a little lower, within fairly contained ranges.

German 10-year yields have drifted down to 0.19% while US equivalents now trade around 2.32%. The market continues to fully price a Fed hike on the 14 December.

Daily swap rates

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Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA


Kymberly Martin is on the BNZ Research team. All its research is available here.

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