By Kymberly Martin
On Friday, yields closed little changed. On the week, NZ swap yields closed up 10-15bps, as the market reduced its expectation of rate cuts in the year ahead.
Still, the market assigns an 85% chance of a cut in the year ahead and a 15% chance of a cut at the next RBNZ meeting on Dec 6.
For now, swap yields remain around the middle of their well-established ranges traded since June. 2 and 10-year swap finished the week at 2.66% and 3.77% respectively.
With the 2s-10s curve now at 111bps, we will be looking for opportunities as we approach 120bps to position for flattening. However, if the recent sharp sell-off in AU and US long bonds were to continue into year end, it would likely to add to steepening pressure on the NZ curve.
On Friday night, ‘safe haven’ German and US bond yields were underpinned by the solid German IFO readings. US 10-year bond yields closed the week at 1.69%, 14bps above their lows of the previous week. Peripheral European spreads to German bonds continued to tighten.
It will likely be a relatively quiet start to the weekend today, with no local data releases.
Tomorrow, the RBNZ’s survey of 2-year-ahead inflation expectations will be released. As of Q3, these expectations were on a declining trend but still uncomfortably high at 2.3%.
The RBNZ will be watching the Q4 outcome with interest along with a new component to the survey on house price expectations.
It is now specifically within the RBNZ’s mandate to target ‘asset prices’, according to the new PTA signed under new Governor Wheeler.
Along with a plethora of data releases on either side of the Atlantic this week, look out for a fair amount of Fed and ECB speak.
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1 Comments
Good news always makes my day! Good times are nigh!!
The comment that follows is part of a periodic publication by a well known and respected financial advisor in the USA. His team is integrated by ex-members of the Federal Reserve, and very knowledgeable people. They specialize in the Municipal Bond market. He was speaking on the Debt Ceiling and its' periodic expansion to accomodate deficits. He said there is no substance to the limit since it has continuously expanded over the past decades.
HGW
Fiscal cliff is another fiction. We do not need to have expiration dates on legislation, tax policy, or spending mechanisms. Congress designs them to mature immediately following a national election. Again, this is a charade created by the scoundrels that we elect to serve us in Washington. In fact, Democrats and Republicans agree on this one. They coalesce into a common threat to us by purposefully choosing termination dates that follow hard on the heels of elections. They exploit the short memory span of the distracted American electorate. Shame on us for having such short memories.
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