Trump policies driving trade concerns, moving investors to more risk-averse positions. Bond prices rise. Yellen sees only modest inflation pressure

By Jason Wong

Global bond yields are lower, with the Trump-inspired rally in US Treasuries a driving force, along with ongoing QE policy in the UK and euro-area.

The ECB looks to have been buying German bonds below the 0.4% deposit rate threshold. Germany's yield curve is negative out to the 5-year maturity, which sits at -0.45%. Germany's 10-year rate fell by 6bps to 0.36%.

US rates are lower across the curve, with the 2-year rate down 4 bps at 1.15% and the 10-year rate down 7 bps to just below the 2.40% mark. The 10-year rate was around the 2.50% mark as Trump began his speech on Friday.

Fed rate hike pricing has slipped a little, with the OIS market pricing in +22 bps by June and +47bps by December. It could reflect the (still) lack of detail around Trump's fiscal plans but we also interpreted Yellen's speech on Friday afternoon NZ time as fairly dovish. She spent much of the time outlining why she's comfortable that inflation pressures are fairly modest, why the tightening path will only be gradual, and why it's not particularly unusual why current rates remain so low.

After the Wellington public holiday yesterday, the bias for local rates will be to the downside today, driven by global forces. The data calendar remains light over the next 24 hours, with the series of Markit PMIs across the world of some interest.

The local highlight this week will be the CPI on Thursday, with Governor Wheeler's speech soon after now deemed to be off the record and containing nothing new with regards to monetary policy.

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