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Markets await Trump tax plan, but assume he be equally ineffective as previous 'plans'. Other data should have larger impact

Bonds
Markets await Trump tax plan, but assume he be equally ineffective as previous 'plans'. Other data should have larger impact

By Doug Steel

US 10 year Treasury yields traded in a tight 2.5 bp range, currently sitting less than 1 bp lower at just under 2.16%.

Strong investor demand at a 5 year Treasury note auction saw 5 year yields down 1.5%, while US 30 year Treasury yields edged 1% higher. All minor moves ahead of data later in the week, including the PCE deflator on Thursday and payrolls and ISM surveys on Friday. That is, assuming the market ignores President Trump’s tax announcement on Wednesday preferring, now, to see action rather than words.

There remains little movement in NZ rates. NZ 2-year swap closed up 0.5 bp at 2.185% yesterday, showing no signs that it will break out of the tight 2.15% to 2.20% established range over the past few weeks.

In fact, there was next to no movement at all right across the entire NZ swap and bond curve yesterday. Indicative of the slumber, all tenors moved by no more than half a basis point. NZ 5 swap closed just over 2.64% and 10 swap at 3.13%.

Looking at the day ahead, consumer confidence readings are expected to remain very strong in both Germany and the US. Barring a major shock, nothing there to excite markets. Looks like being a quiet session.

Daily swap rates

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Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA
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Source: NZFMA
Opening daily rate
Source: NZFMA
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Source: NZFMA
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Source: NZFMA


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

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