sign up log in
Want to go ad-free? Find out how, here.

UST yields at the lowest level in a month, 10yr rate down to 2.35%; UK CPI reaches a 2-year high as weaker GBP feeds through; Quiet trading day in NZ with the swap curve holding constant

Bonds
UST yields at the lowest level in a month, 10yr rate down to 2.35%; UK CPI reaches a 2-year high as weaker GBP feeds through; Quiet trading day in NZ with the swap curve holding constant

By Jason Wong

Following the Martin Luther King holiday, US Treasury yields fell to their lowest level in a month, as the post-Trump sell-off continued to unwind. No doubt Trump's additional comments in the WSJ had some impact. The 10-year rate is currently down 5bps from the weekend close to 2.35%, having traded as low as 2.30%. Yields are lower across the curve including the very short end. The OIS market now prices close to 50bps of hikes for this year, with pricing edging lower over recent days and weeks.

Germany and UK 10 year rates were roughly flat on the day. Ahead of PM May's Brexit speech, UK CPI data were released showing inflation running ahead of expectations, reaching a 2-year high as the weaker GBP feeds through. Yesterday, BoE Governor Carney warned that rapidly accelerating inflation would put the brakes on consumer spending this year.

Local rates trading was very quiet yesterday with very little being dealt.  The swap curve didn’t budge, with the 2-year rate marked at 2.40% at the close and the 10-year rate at 3.40%.  The QSBO release, showing buoyant business confidence and rising inflationary pressure, had little impact on the market.

The Kauri issuance season has begun in earnest.  The World Bank launched a new $200m 5-year Kauri bond.  This follows Rentenbank’s $75m top-up of its existing 7-year issue at the end of last week.  NZ’s swap market remained lifeless despite the prospect of possible hedging flows for this issuance.

In the day ahead there are no notable releases scheduled during local trading hours.  Tonight sees US CPI data released, where traders will be watching for some pick-up to support the higher rate track currently priced in.

Daily swap rates

Select chart tabs

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


Jason Wong is on the BNZ Research team. All its research is available here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

2 Comments

Headline and opening text "sell-off continues to unwind" is misleading

An unwind describes the reversal or closure of an open position

That unwind could well be achieved by a sell-off.
A sell-off can begin, continue, speed-up, slow-down, but, never unwind

Up
0

I thought logging of native forest was banned now? Their cant be that much swamp kauri to trade overseas. (Again illegal to sell raw kauri logs anyways - must be processed in NZ)

Up
0