US benchmark yields "leak lower". German and UK yields follow. NZ yields lower and flatter

By Doug Steel

US Treasury yields continued to leak lower on Friday, with 2-year yields down about 1 bp and 10-year yields down around 2 bps to close the week at 1.3% and 2.2% respectively.

This was consistent with the theme elsewhere with 10-year German Bunds down 2 bps and 10-year UK Gilts down 3 bps.

The FOMC meets this week and is almost certain to leave rates on hold. The decision is due Thursday morning NZT. US Q2 GDP data is due Friday and is expected to reveal 2.5% growth after 1.4% in Q1.

Yields were lower amid a dip in oil prices, which fell around 2.5% on Friday after a report OPEC crude supply will be the highest since December. After edging above $US50/bbl on Thursday, Brent crude peeled back to around $US48. The OPEC/Non-OPEC Joint Monitoring Committee meets today.

Local yields were generally lower with a flattening bias on Friday, following recent offshore trends. NZ 2-year swap closed down 2 bps to 2.22%, while 5 and 10 year swap finished down 4 bps to 2.76% and 3.27% respectively.

We see nothing on the local calendar to materially disturb pricing this week, so it looks like any direction would stem from offshore.

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