By Kymberly Martin
NZ yields closed little changed yesterday. Overnight, the relentless rally in US Treasuries continued.
NZ swaps initially traded lower yesterday morning. However, after the stronger than expected AU employment report they pushed higher in the afternoon. The result was swaps closed little change across the curve. 2-year sits at 3.78% while 10-year is at 3.88%.
On the back of the AU employment data AU swaps gapped higher. Indicatively, 3-year jumped from 2.40% to almost 2.50%. However, overnight, as US yields have slipped again, AU swaps have returned to trade at their pre-data levels.
Late last evening, the Swiss National Bank surprised the market by removing its cap on the franc and cutting rates. It cut its three-month Libor rate by 50bps to a new range between -1.25% and -0.25%. The shift in tactics has been timed to bite ahead of the ECB’s meeting next week.
The move sent ripples through markets. The yield on German 10-year bonds dropped from 0.50% to 0.47% while that for US equivalents subsequently declined from 1.88% to 1.77%.
Expect these moves to see further downward pressure on NZ long-end yields today, in the absence of domestic data releases.
Tonight, the markets focus will be on Dec CPI readings for Eurozone and the US.
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