By Kymberly Martin
It was a relatively subdued day in rates markets ahead of the two key risk events, the RBNZ meeting and US FOMC meeting this morning.
NZ swaps traded a 2-3 bps range but ultimately closed little changed.
There was a bit of a push higher in yields early yesterday afternoon on the back of the firmer than expected AU CPI number. Still, it didn’t come to much.
NZ 2-year swap sits at 3.64% as we await the RBNZ meeting (9am). The market still prices almost a 50% chance of an RBNZ cut by year-end. We think the RBNZ will try not to encourage the pricing of cuts with its statement today.
The market has modestly reduced its expectations for RBA rate cuts. The market now prices around 45 bps of cuts by year-end.
The other event of note domestically was the printing of NZ$800m of IBRD Kauri bonds. This continues the strong start to the Kauri issuance season seen so far this year, and shows continued strong demand for NZ$ rate products.
In the absence of key data releases overnight the market is firmly fixated on the imminent US FOMC meeting.
US 10-year yields have traded a range overnight, at the lower-end of this range at present, around 1.79%.
Meanwhile German equivalents slipped from 0.42% down to 0.35%, hugging historic lows.
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