Fed minutes take gloss off of good US jobs report. Germans want ECB to take foot off pedal 'slightly'. LGFA bond tender impresses markets

By Jason Wong

US Treasury yields were higher for most of the night, following the strong ADP employment release, with the 10-year rate reaching as high as 2.38%, but yields slipped after the FOMC minutes and are currently around 2.35%, pretty flat compared to the NZ close.

The market is currently divided on whether the Fed will hike again as soon as June, with the probability of a hike at that meeting just over the 60% mark.

The minutes revealed that the committee is still split on whether it has achieved or about to achieve its 2% inflation goal.

Germany’s 10-year rate rose by 2 bps after ECB Governing Council member Jens Weidmann told Die Zeit the time is approaching for the central bank to “not have the foot pressed down on the gas pedal, but to lift it slightly.”  But that gain was gradually pared back and 10-year bunds closed flat at 0.26%.

NZ rates were little changed yesterday, with the 2-year swap rate up 1 bp to 2.28% and the 10-year rate down 0.5 bp to 3.36%.  The recent increase in demand for yield sees NZ’s 10 year government bond yield trade at the bottom end of its trading range this year at around 3.10%. 

Yesterday saw strong bidding interest in the LGFA’s tender, which included a new 2033 line. Bid/cover ratios were high and the bonds were cleared well inside pre-tender mid rates for the maturities on offer.

Daily swap rates

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for(i=0;i

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