Local rates follow the US. Markets expect no OCR change in 2017, but investors watching CPI signals

By Jason Wong

The higher US Treasury curve has gone against the grain of slightly lower UK and German rates. 

Germany’s 10 year rate is down to 0.33%, supported by talk of the ECB maintaining a highly accommodative stance and the weaker inflation figures noted earlier.

The US 10-year rate is up 3 bps to 2.41%, with rates grinding higher after that GDP release and little other news. The curve has steepened slightly, with the 2-year rate up 1 bp to 1.28%.

With little NZ news this week, the local rates market has been driven by global forces.

There was a modest downside bias to rates, with the 2-year swap rate down 1.5% to 2.32% and the 10-year rate down 2.5 bps to 3.285%.

The short end of the curve remains well anchored as the OCR looks to be on hold all year.

Today’s ANZ survey is unlikely to change that view and we still keenly await CPI data in three weeks. 

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.