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Mortgage demand may start impacting swap rates. Markets likely to ignore dairy auction but will focus on Q4 CPI

Bonds
Mortgage demand may start impacting swap rates. Markets likely to ignore dairy auction but will focus on Q4 CPI

By Kymberly Martin

In a relatively quiet day of trading the NZ curve steepened a little.

Overnight, US 10-year yields have slipped to 1.77%.

The rates markets seemed fairly disinterested in the release of the QSBO yesterday that confirmed robust activity if limited pricing pressures.

NZ 2-year swap closed virtually unchanged at 3.73%. 10-year closed up 3 bps at 3.83%.

As markets return to normal vigour after the summer lull we expect to see increased payside flow at the short-end from the mortgage book, as borrowers look to take advantage of current low rates and specials.

We also anticipate increased corporate paying at the long-end as they seek to benefit from the current flatness of the curve.

However, offshore receiving interest will likely remain persistent given expected low-side inflation readings in coming months.

Today’s Q4 CPI release will be important. We expect a -0.1%q/q reading (consensus 0.0%).

The January German ZEW survey of analysts’ views on the economy showed sentiment holding up well despite the imminent Greek elections. German 10-year yields traded up from intra-night lows around 0.43%, to above 0.45%. US equivalents initially pushed up from 1.79% to above 1.83%, but have subsequently declined to 1.77%.

The GDT dairy auction overnight is unlikely to notably impact the rates market this morning that will be firmly concentrated on the Q4 CPI release (10.45am NZT).

 

 

 

Daily swap rates

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Source: NZFMA
Source: NZFMA
Source: NZFMA
Source: NZFMA
Source: NZFMA
Source: NZFMA
Source: NZFMA

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1 Comments

Some banks need to sharpen their pencils to offer the 5.5% rate for 2 years like their competitors? 

Heard the word Deflation on TVOne news this morning. 

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