Investors fear Greece. NZ markets react to US data, swaps pushing higher with a steeper bias

By Kymberly Martin

NZ swaps closed up 10-12bps yesterday with a slight steepening of the curve.

Overnight, US 10-year yields traded between 1.88% and 1.94%.

In the absence of domestic data releases, Friday night’s US payrolls report dominated the NZ market’s moves yesterday.

Swaps pushed higher from the open, with 2-year closing 10 bps higher at 3.62%. 10-year closed at 3.74%, steepening the 2-10s curve to 12 bps.

We expect further steepening over the course of the year to take the curve back up toward 40 bps. Consequently, we continue to see attractive hedging opportunities at the long-end of the curve.

Overnight, attention remained on Greece’s standoff with its creditors, in the absence of key data releases.

Greek 10-year yields have surged higher to 10.6%, back toward the 11% level they spiked to at the end of January after the Syriza party dominated the national elections.

Some contagion to other peripheral bonds is also being seen.

Italian-German 10-year bond spreads pushed more than 10 bps wider overnight to 131 bps.

Meanwhile, German 10-year bond yields continue to trade not far from historic lows. 10-year yields sit at 0.36% this morning.

US 10-year yields were fairly directionless overnight, consolidating after Friday night’s surge higher. They sit at 1.94% this morning, off intra-night lows close to 1.88%.