US equities are higher, bond yields a bit lower, and the US dollar weaker as markets have retraced the moves seen after the FOMC minutes yesterday (which were initially interpreted as hawkish). The ECB minutes suggested that the central bank’s forward guidance will change in the upcoming meetings. The NZD is unchanged from this time yesterday.
Shortly after we sent yesterday’s Report, the minutes to the January FOMC meeting were released. The minutes noted that a number of Fed officials had increased their growth forecasts since December. Since then, US wage and inflation data has surprised on the upside, implying that the risks are tilted towards the Fed nudging up their rate projections (i.e. the ‘dots’) at the March meeting. US yields moved higher after the minutes, with the 10 year rate hitting 2.95% although these moves have subsequently reversed overnight (the 10 year rate is back to 2.915%), probably due to profit-taking from investors.
The short end of the US Treasury curve has been reasonably stable and the market continues to price just less than 3 hikes for this year.
NZ swap yields moved a little higher yesterday, but again by less than the US. The spread between 10 year NZ and US government bonds reached just 3bps (the spread between Australian and US 10 year bonds is -6bps). The NZDMO’s tender of 2033 maturity bonds went well, with a bid to cover ratio over 3.
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