Rates fall worldwide despite positive consumer sentiment. Low German inflation may be behind the drop, and reports US tax cut proposals are faltering. Data rush coming

By Jason Wong

The Spanish government took control of the Catalan government with little resistance.

In economic data, euro area economic confidence surged to its highest level in almost 17 years while German CPI data came in 0.2 percentage points below expectations, despite the country’s very strong economic backdrop, highlighting the challenge the ECB faces in getting inflation higher. 

Weaker German CPI data saw its 10-year rate fall 2 bps to 0.37%. 

With UST yields dragged lower after the report on phasing in of tax cuts, the lower global rate environment has supported the yen and sees NZD/JPY down 0.6% to 77.7.

Lower US rates on Friday night saw NZ’s yield curve dragged lower, with the 2-year swap rate down 1 bps to 2.16% and the 10-year rate down 5 bps to 3.20%.  The 10-year government bond rate moved back below the 3% mark, falling 5 bps to 2.98%.

There is plenty on the economic calendar today.  The ANZ NZ business outlook survey pre-dates the coalition announcement reducing our interest, but there’s plenty of offshore data to consider, including China PMI data, euro area CPI and GDP data and in the US employment costs and confidence data. 

The BoJ is expected to keep its very easy policy settings unchanged as it battles to generate some inflation with an empty toolbox.

Jason Wong is on the BNZ Research team. All its research is available here.