By Kymberley Martin
NZ swaps pushed higher by 2bps across the curve yesterday.
Overnight, US 10-year yields tracked sideways around 2.61%.
Yields on NZ 2 and 5-year swap closed at 3.98% and 4.43% respectively. The 2-10s curve continues to sit at 86bps.
As a point of reference, current 2-year ‘fair value’, based on our projected OCR track (which sees a 5.0% peak late next year), sits around 4.60%. We continue to see solid hedging opportunities across 2-5-year swap rates based on our OCR trajectory.
Overnight, in the absence of key data releases, equity markets continued their steady trek higher. US 10-year yields traded very tight ranges between 2.60% and 2.63%.
Today, NZ Q1 manufacturing volumes will be released, as another key input to Q1 GDP. We expect sales and inventory figures to infer a 1.5% gain in the industry’s production.
On this basis we continue to look for a fairly chunky 1.2%q/q Q1 GDP releases (due 19 June). Across the Tasman, today’s key release will be the NAB business survey.
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