US Treasury yields are up around 4-5bps across the curve, with the 10-year rate up 4bps to 2.28%; the probability of the Fed hiking in December according to the Fed Fund curve has nudged up further to 60%; NZ rates continued to follow global rates higher

By Jason Wong

US Treasury yields are up around 4-5bps across the curve, with the 10-year rate up 4bps to 2.28%.  The probability of the Fed hiking in December according to the Fed Fund curve has nudged up further to 60%.  The curve is about 5bps higher by the end of next year compared to yesterday, but the market remains sceptical that the Fed will be doing as much hiking next year as indicated – more like 1 hike next year rather than 3.

In other news, oil prices are up around 2% to reach their highest level since April (Brent) or May (WTI) ,to $50.40 and $56.20 respectively.  This followed a report of US gasoline inventories falling to a 22-month low.

Yesterday, NZ rates continued to follow global rates higher, with the 2-year swap rate up 1bp to 2.25%, its highest close since mid-July, while the 10-year swap rate rose by 2bps to 3.28% its highest close since the beginning of August.  More upside pressure can be expected today post-FOMC statement.

NZ Q2 GDP this morning is expected to show a result better (0.8% q/q) than the last couple of quarters, but not flash in the context of the Lions’ tour and its recent mediocre run on a per capita basis.

The BoJ’s meeting should pass with little market reaction as it keeps policy steady and meeting its inflation target remains a distant prospect.  In Australia Governor Lowe’s speech early this evening is on the “Next Chapter”.

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

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