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).
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.