by Kymberly Martin
It was a fairly quiet day in NZ markets with yields closing up 1-5bps across the curve. Overnight, US 10-year yields moved lower.
NZ 2-year swap yields remained fairly stable yesterday, closing up just 1bps at 3.05%. However, the curve steepened with a 4bps rise in 5-year yields, and 5bps rise in the 10-year. The 2s-10s curve has steepened to 144bps.
Bond yields closed up around 3bps across the curve. The yield on NZGB23s (reclassified as the NZ 10-year bond) closed at 4.27%.
Heading into today’s RBA meeting the market is close to pricing a 50% chance of a rate cut. The NZ-AU 2-year swap spread continues to sit around -98bps, close to its highs for the year. If the RBA fails to cut today expect this spread to become more negative as AU 2-year swap yields rise.
Overnight, US “safe haven” 10-year bonds were initially in demand. This was in line with the fall in European equities after data confirmed the Eurozone unemployment rate rose to 10.8% in February, from 10.7% previously.
The yield on US 10-year bonds fell as low as 2.16%. However, after a stronger-than-expected outcome for the March US manufacturing ISM, yields have moved up to 2.19%.
Aside from today’s 4.30pm (NZT) RBA meeting, the focus tonight will be on the release of the Federal Reserve minutes from March 13.
These are important, given that is was this meeting that initially set US 10-year yields soaring, after the official statement was less dovish than the market expected, with no hint of QEIII. Subsequently yields have given back half of their initial 40bps rise.
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