By Kymberly Martin
NZ swaps closed up 2-6 bps across the curve.
Overnight, US 10-year yields traded up from 1.97% to 2.01%.
NZ yields played catch-up to offshore moves, drifting higher in the absence of domestic catalysts.
The greatest pressure was felt at the long end of the curve with the 2-10s swap curve steepening to 18 bps. We expect steepening has further to go over the medium term, targeting at least 40 bps.
We continue to see the most compelling hedging opportunities at the long end of the curve.
NZ bond yields also pushed higher across the curve yesterday ahead of the NZ DMO’s tender today.
It will offer NZ$300m of NZGB 2027s. This is the first tender of nominal bonds since mid-December. We expect to see solid demand, especially as NZGBs have cheapened up over the past couple of weeks.
Markets were relatively subdued overnight in the absence of key data releases, as the market waited for news from Greece’s emergency meeting with its creditors. Yet the market appears quite weary of the whole issue, with still only limited signs of contagion beyond Greece. The yield on Greek 10-year bonds has pushed up again, from 10.1% to 10.4%. Italian-German 10-year spreads have widened from 1.29% to 1.34%.
US Treasuries continued their sell-off overnight as 10-year yields pushed up from 1.97% to 2.02%. A break through support at this level would ultimately open the way for yields to trade back toward 2.20%.
Tonight the Bank of England will release its inflation report.
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