It was only a few days ago that US 10-year Treasury yields were flirting with the bottom of the well-established 2.30-2.60% range. They are now in the top half of that range, and are up 4.5 bps for the day at close to 2.50%.
The US 2-year rate has blasted through prior highs of mid-December and is up 4 bps to 1.33%, a level not seen since August 2009.
The local rates market was unmoved by Governor Wheeler’s speech, and still toys with the chance that a rate hike could come as soon as November, with close to an even chance priced in – a stark contrast to the RBNZ’s view that rates can remain on hold until late 2019 (not a typo).
That said, the market respects the view that the RBNZ will not be raising rates before the September election and that is helping underpin the 2-year swap rate at 2.35%, the middle of the now established 2.30-2.40% range.
Higher global yields continue to driver a steeper yield curve, with the 10-year swap rate up 2.5 bps to 3.54%. Expect further upside pressure today.
The market awaits Fischer and Yellen’s speeches tomorrow morning NZ time and it would now be a surprise for them to push back against a March hike. Before then Japan CPI data are released and the US non-manufacturing ISM index.
Daily swap rates
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Jason Wong is on the BNZ Research team. All its research is available here.
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