Chart watch: Bond yields spike

Yields on secondary market NZ Government bonds have suddenly blown out in the past few days. Click on the 5yr or 10yr tabs in the chart below. This matches similar moves on the interest-rate swap market. Market participants are reporting that home owners are suddenly rushing to convert their variable loans to long-term fixed rates, and without investors on the other side of these transactions (a credit crunch effect), all-demand-and-little-supply is pushing the price of most of these instruments sky-high. This may accentuate the rise in cost of long-term money, itself pressing even higher the rate of fixed-rate mortgages. For further information on the issue, see this Reuters story.