By Kymberly Martin
NZ swaps closed lower across the curve yesterday.
US Treasuries had a turbulent night with yields ultimately returning to early evening lows.
The main catalyst for the NZ swap market was the release of the weaker than expected AU employment report early yesterday afternoon.
NZ 2-year swap declined about 4bps after the release to end the day below 3.60%.
10-year closed at 3.79%, taking the 2-10s curve a little steeper to 19 bps.
Meanwhile AU swaps gapped lower on the data release. 3-year swap fell 10 bps to 2.28%. The market now prices around 45 bps of further rate cuts from the RBA and around 16 bps from the RBNZ.
Yesterday’s DMO tender of NZ$300m of NZGB 2027 attracted very strong demand.
The bonds sold at an average yield of 3.35%, some way below where the bonds had been trading in the market just prior. This tender may have sated the appetite of those who were short, but supply constraint remains. The next tender of nominal bonds is not until March 13.
Overnight, US yields pushed higher ahead of the release of US Jan retail sales data. On the weaker than expected result yields fell sharply. From 2.04%, US 10-year yields returned to trade at 1.97% currently.
Meanwhile, German equivalents slipped back toward historic lows, at 0.32%. However, European leaders were keen to play down the focus on the ‘Greek issue’ as the European Union summit launched overnight. Initial attention was on the cease-fire just struck during negotiations in Belarus.
Only NZ food prices are due for release domestically today.
NZ yields may take their cue from moves overnight and feel some downward pressure at the long-end today.
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.