US 10-year Treasuries were in a tight range of 1.58-1.60% until reports of credit concerns at Deutsche Bank re-emerged, seeing a sharp 4 bps fall in minutes.
The yield currently sits down 2 bp for the day at 1.56%.
Advanced data on the US trade balance showed a narrower than expected deficit in August, leading some to indicate upside potential for Q3 GDP. Revised data showed a slightly better 1.4% annual rate for Q2.
The US 2-year rate, currently 0.74%, has remained in a tight range post last week’s FOMC meeting, indicating little change in monetary policy expectations. A number of Fed speakers have been out in force on the speaking circuit. Lockhart (non-voter) supported last week’s no-change decision but sees potential for raising rates “before long”. Harker (alternate voter) wants to raise rates “sooner, rather than later”. George (voter) says “it’s time” for the Fed to raise rates. Powell (voter) continued to run the line that the Fed can afford to be patient.
Yesterday, the local rates market saw slightly higher yields, a reflection of global forces in response to the OPEC announcement of future oil production cuts. Swap yields were up 1-2 bps across the curve, with the 2-year rate closing at 2.02% and the 10-year rate at 2.49%. Lower US rates since the local market close, if sustained, should impart a downward bias to NZ rates today.
After the dearth of economic data releases this week, there’s a humungous amount over the next 24 hours, with the table below just showing the main releases.
We’ll be watching the ANZ business outlook survey early this afternoon. Activity indicators are likely to remain solid and we doubt we’ll see a rise in inflation expectations that the RBNZ wants to see. Internationally, attention will be on the core CPI deflator as a guide to the urgency for the Fed to hike rates later this year.