by Kymberley Martin
It was a very quiet start the week for both NZ bond and swap markets.
NZ swap yields closed a fraction higher yesterday.
They continue to consolidate in their new higher ranges.
The 2 and 5-year yield closed at 3.08% and 3.84% respectively.
We continue to eye 3.20% and 4.00% respectively, as their next resistance levels. At 3.20% on the 2-year, the market would price a view for the OCR over the next couple of years not dissimilar to our own - that is, a first 25bps rate hike in December, followed by gradual hikes thereafter, taking the OCR to 3.75% by early 2014.
Overnight in a speech, Fed chairman Bernanke said he was encouraged by the recent drop in the US unemployment rate to 8.3%. However, he suggested further improvement would require continued accommodative policies.
US 10-year yields traded in a 2.24% - 2.29% range overnight. They appear to be consolidating after their recent surge higher.
Further positive US data surprises or more hawkish Fed comments will be required to move them up to the next level.
German equivalents moved up from 1.88% to 1.95% overnight.
However, they still languish in their familiar low range, and have not followed US yields’ surge higher. The US-German 10-year spread, at 30bps, is now at its highest level since July last year.
With no NZ data released until Thursday’s NBNZ business confidence survey, and a lack of key global data releases today, expect NZ yields to consolidate in their recent range.
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