Receivers re-enter the local interest rates market leading to a pull-back in the sharp run-up in rates. But it may only be a temporary respite

By Doug Steel

There was limited movement in global bond yields overnight, outside of a Poloz-inspired 6.5 bp jump in Canadian 10-year rates. German 10-year bunds were unchanged, while UK 10-year gilts eased 1 bp.

Focus turns to tomorrow morning’s Fed minutes, ahead of Friday’s US payrolls and Monetary Policy Report to the Congress.

After a strong run higher since the beginning of last week, the NZ’s rates market found some receivers yesterday ending days of a one-sided market.

Receivers may be further encouraged by the RBA holding its stance. AU swap rates fell around 5-6 bps on the day.

Yesterday’s QSBO, despite remaining robust, we don’t see it as adding or subtracting to the RBNZ’s views on inflationary pressure and thus to the Bank’s neutral policy stance.

That said, the near parallel pullback in NZ swap yields yesterday looks as much like a pause for breath after a strong run higher as anything else.

NZ 2-year swap fell around 3 bps on the day, to close 2.34%. It remains more than 11 bps higher than the beginning of last week. NZ 5-year and 10-year swap fell about 3 bps and 4 pbs to 2.90% and 3.38% respectively.

Doug Steel is a senior economist at BNZ Markets. All its research is available here.