By Kymberley Martin
It was a quiet day as markets anticipated holidays overnight in both the UK and US markets.
NZ yields closed down around 3bps across bond and swap curves.
NZ 2-year swap is back at 3.95%, not far from April lows.
The market continues to price almost a 90% chance of a 25bps hike from the RBNZ on 12 June, but only 125bps of cumulative hikes in the next two years.
We anticipate the RBNZ will ultimately deliver more than the market expects. This provides hedging opportunities for borrowers.
NZ 5 and 10-year swap rates also sit 3bps lower at 4.38% and 4.76% respectively.
In the absence of any direction from UK and US markets, German bunds traded fairly tight ranges overnight. 10-year yields traded between 1.40% and 1.43%.
Meanwhile the mid-May surge higher in peripheral European spreads to ‘safe haven’ Bunds has been reversed. For example, Italian-German 10-year spreads that touched 195bps last week are now back at 157bps.
Today domestic markets will again be lacking catalysts. There are no NZ data releases scheduled.
Tonight US durable goods orders, consumer confidence and the Richmond Fed manufacturing index will be released, which may provide some direction for Treasury yields.
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