Yields firmer on better risk sentiment. Dudley talks up Fed options. Eyes turn to new 2029 NZGB, an election consideration?

By Jason Wong

The bond market has had a sleepy start to the week. 

Better risk sentiment sees yields slightly higher across the board.

The US 10-year rate has traded in a 2.20-2.23% range, with yields moving near the top of that range after Dudley’s comments were reported, up 1-2 bps relative to the NZ close.

The market remains sceptical that the Fed will deliver another rate hike this year, although the odds have increased to 35%, from 25% at the end of last week.

There’s little to say about the NZ rates market yesterday, with the swap curve showing rate increases of 1 bp or less.  Swap spreads narrowed as NZ government rates rose, including a 5 bp increase in the 10-year rate.

The market is awaiting an announcement of a new 2029 bond issue syndication that the DMO said would be issued before the end of the year.

Some suggest that the preference might be to get this underway before the 23 September general election.

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