German bonds trade in a wide range as markets decipher ECB policy; US Treasuries followed gyrations in German rates; local rates were up following previous day's offshore move

By Jason Wong

In the bond market, Germany’s 10 year rate traded in a wide 0.33-0.41% range, following yesterday’s rather large 13bp sell-off, as the markets try to decipher where ECB policy is heading.  It closed the day flat at 0.37%.   US Treasuries largely followed the gyrations in Germany rates, with the 10-year rate rising as high as 2.26%, before settling down to 2.22%, up about 2bps from the NZ close.

The NZ rates curve was steeper and higher yesterday, following the previous day’s offshore move.  The 2-year swap rate closed near the top of its 2.15-2.25% trading range at 2.24%, up 3bps, while the 10-year rate was up 8bps to 3.21%.  We suspect that upside pressure to yields will linger as investors ponder whether a reversal of the fall in global rates seen through much of this year is in the making.

The economic calendar steps up a gear, with the release of the ANZ business outlook survey today, while the key release tonight will be advance CPI data in the euro area.

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