NZ swaps closed down 3-7 bps yesterday as the curve flattened.
Overnight, US 10-year yields slid from 2.13% to below 2.09%.
NZ swaps opened lower yesterday morning taking their cue from the previous night’s offshore moves. A softer ANZ consumer confidence reading in the afternoon (now at its lowest level since mid-2012) did nothing to curtail the drift lower in yields.
2-year swap closed down 3 bps, at 2.86%. We continue to expect 2-year swap will push down toward 2.70%, assuming the RBNZ delivers 25 bps rate cuts at its next two meetings. NZ 10-year swap slipped 7 bps, to 3.57%, its lowest level since early-Feb, and not far from its all-time lows reached in mid-2012.
The 2-10s curve closed at 71 bps, the lower end of its range of the past couple of months. However, it may well break lower today, given moves seen offshore overnight.
US 10-year yields continued their drift lower, only briefly interrupted by some stronger than expected US data releases. Reports that Greek Prime Minister, Tsipras is to call a snap election on 20 Sept, only added to ‘safe haven’ demand for US Treasuries, amid ongoing concerns regarding the state of the global economy. US 10-year yields declined as US equities followed European counterparts lower. US 10-year yields trade at 2.09% this morning, the lower-end of ranges for the past four months.
Shorter-dated US bond yields were steadier, with 2-year bond yields trading around 0.67%. However, the market is increasing moving away from pricing much prospect of a Sept Fed rate hike. If a Greek election is scheduled for 20 Sept, this is just another burden (along with low US CPI and lack of wage increases) for the FOMC to consider in its decision on 17 Sept.
The chances of Fed delay are looking increasingly likely.