By Kymberly Martin
NZ swaps and bond yields closed down 2-6bps yesterday. Overnight, US 10-year yields traded between 2.67% and 2.71%.
Taking their cue from heightened offshore risk aversion NZ yields pushed lower yesterday, particularly at the longer-end of the curve. The move in swaps may also have been influenced by potential bond issuance, resulting in receiving interest. Overall 5 and 10-year swap closed down 4 and 5bps respectively, at 4.53% and 4.90%.
The short-end of the curve held its ground a bit better. 2-year swap closed down 2bps at 4.00%. This is the lower-end of the tight 3.99%-4.13% range it has traded for the past six weeks. We expect to see further SME and mortgage book paying at these levels. We maintain a pay-on-dips strategy to swaps, believing the entire swap curve will be notably higher by year-end.
The yield on NZGB23s slipped to 4.43% yesterday, a new low since mid -August last year.
Overnight, US yields were initially boosted by data showing US pending home sales rose 3.4%m/m in March (1.0%m/m expected). US 10-year yields briefly approached 2.71% before dropping back to 2.67%. The tense situation in the Ukraine maintains the appeal of ‘safe haven’ US Treasuries.
Today the NZ March trade balance will be released. We expect another solid set of numbers.
This afternoon the RBNZ publishes its March reading of high LVR mortgage lending. We anticipate this will stay well below the RBNZ’s-imposed 10% ceiling.
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