Global yields are down slightly on little news, with Germany’s 10-year rate down 1 bp to 0.58% and the US 10-year rate down 2.5 bps to 2.305%, having traded in a tight 2.30-2.33% range.
There has been a hint of yield curve flattening, with the 2-year rate unchanged at 1.355%.
The local rates market was fairly dead yesterday, and swap rates were marked down 1-2 bps across the curve, ahead of today’s much-anticipated Q2 CPI release.
We expect a soft result of 0.1% q/q and 1.8% y/y (below the RBNZ’s pick back in May of 2.1% y/y, which didn’t have the benefit of knowing the recent tumble in oil prices). A soft result would support our view that the RBNZ isn’t likely to do an about-turn like the Bank of Canada recently did.
We see the data reinforcing the RBNZ’s decisively neutral policy stance for some time.
If anything, inflation is tracking below the Bank’s projections, given the combination of a stronger NZD and lower oil prices since the May MPS.
Tonight sees the release of UK CPI data and another GDT dairy auction.