The US data only had a small impact on the rates market. The US 10-year rate is flat for the day at 2.13%, after spending much of the Asian trading session around the 2.15% mark. The Fed Funds market only shows about a 1 in 3 chance of another hike this year, while one has to look as far out as early 2019 to see another full 25bps hike priced in.
The local rates curve saw a steepening bias, with global forces in the driving seat. The 2-year rate closed 1bp higher at 2.20% and the 10-year rate was 3bps higher to 3.16%. The Australian 10-yr bond future spat the dummy yesterday, rising by 5bps in no time, but that move has reversed overnight and this could a little downward pressure on NZ rates on the open.
Markets should settle through the local trading session today, as the focus turns to tonight’s US employment report. We’re expecting monthly wage data to underwhelm, reflecting technical factors like the timing of the survey, so no fuel there to support a USD or rates turnaround.
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Jason Wong is on the BNZ Research team. All its research is available here.
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