By Kymberley Martin
NZ swaps closed down 1bps across the curve yesterday.
US 10-year yields fell from 2.51% to 2.44%.
Although short-end NZ swaps initially attempted to push higher, the move was soon curtailed.
Fonterra’s payout forecast and the moderation in the ANZ business survey saw the offer tone return to the market.
NZ 2-year swap closed at 3.92%. The 2-10s curve remains at 81bps.
Australian short-end yields pushed lower last evening. For example, 3-year swap declined from 2.99% to 2.95%.
The market has once again begun flirting with the idea of further RBA rate cuts after the recent decline in AU consumer confidence. The market now prices a 20% chance of a 25bps cut by year-end. We think this is unlikely.
Overnight, it was disappointing German unemployment numbers that set the tone for the night. This saw German yields decline, with 10-year slipping from 1.38% to 1.34%. The market increasingly expects action from the ECB next week.
US Treasuries followed.
US$35b of US 5-year Treasuries was also auctioned to stronger-than-average demand. The yield on US 10-year bonds slipped form 2.50% to 2.43%.
Yields have broken through the crucial 2.47% level that has marked their lows since July last year. Tonight the second reading of US Q1 GDP will be released. Consensus already expects downward revision to -0.5%q/q. However, Treasury yields could still push lower on any softness. Speculative short Treasury positions have not yet been entirely flushed out.
Otherwise, it is empty on the domestic data agenda today. Across the Tasman the crucial release will be Q1 capex data.
No chart with that title exists.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.