A risk-off tone in the markets saw the UST yield curve shift lower; the NZ swap curve showed a flattening bias, with larger falls at the longer end of the curve; NZGB 2025 bond tender showed only moderate demand

By Jason Wong

The risk-off tone sees global bond rates nudge lower. The US 10-year rate is down 2.5bps to just below 2.20%, currently at its low for the session.  It has been a fairly parallel shift across the curve, with 2-yr and 30-yr rates down the same. 

The Fed’s Kaplan showed his bent on rate hikes, being prepared to sit on the sidelines and wait for the pick-up in inflation before tightening again.  He said that “I think we should be very patient and judicious” and wants to see more progress on raising inflation before hiking rates again, but he is okay with getting the process of shrinking the balance sheet underway in near future.

The NZ swap rates curve showed a flattening bias, with larger falls at the longer end of the curve, as it reacted to the fall in US rates in the previous session.   The 10-year swap rate fell by 3bps to 3.15%, while the 2-year rate was underpinned around 2.18%. 

The government’s tender of $200m 2025 bonds showed only moderate demand, with a bid-cover ratio of just over 2, as investors anxiously await the possible announcement of syndication of a new 2029 bond issue.  The calendar over the day ahead is fairly uneventful so it should be a quiet day as we head into the weekend.

Daily swap rates

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