Markets eye RBNZ review but don't expect change. Bond yields trade in tight ranges. Slight steepening bias creeping in

By Jason Wong

On bond markets, there’s not a lot to add.  US 10-year Treasuries have traded in a tight 2.25-2.28% range and they currently sit 1 bp below the NZ close at the bottom of that range.

 This likely reflects the tailwind from lower European rates, with UK and Germany 10 year rates down 4 bps and 1 bp respectively. 

A modest fall in oil prices has provided a supporting role.

The local rates market was fairly dead yesterday, with the partial Australian holiday not helping.  There was a slight steeping curve bias, reflecting global forces, with the 2-year swap rate up by less than 1 bp to 2.18% and the 10-year rate up 2 bp to 3.21%.

The short end of the curve remains near the low of the range this year, ahead of Thursday’s MPS, as the market has pushed out the first tightening well into the second half next year, edging closer to the RBNZ’s view of a long period of unchanged policy. 

A quiet local and global economic calendar ahead of that release suggests quiet trading conditions over the next couple of days.

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