NZ 2yr swap rate remained anchored at 2.31% and 10yr swap rate is up to 3.40%; UST rates also showed mild steepening, 10 yr at 2.35%, strong employment report tonight would provide an upside bias

By Jason Wong

The US Treasury curve shows a mild steepening, with yields up 1-3bps, a further move higher in yield following the FOMC statement yesterday.  The 10-year rate sits at 2.35% after earlier nudging 2.365%, a three-week high.  The market is probably reluctant to put on fresh positions ahead of tonight’s US employment report.  A strong report would likely see rates push on higher.  Net speculative positioning data last week showed a long position in US10s had been initiated for the first time in a while, which reduces the hurdle rate for yields to nudge higher.

European rates were also higher, including a 7bps move up in Germany’s 10-year rate to 0.39%.

Yesterday the local rates curve was higher and steeper, a reflection of global forces.  The 2-year swap rate sits at 2.31% and looks likely to remain anchored until the RBNZ’s MPS next Thursday.  The 10-year swap rate is at 3.40% and remains at the mercy of global forces.  In the local trading session today the RBA releases its statement on monetary policy, which should pass with little market reaction.  The RBNZ’s survey of expectations should show a further increase in NZ inflation expectations, with the series on a clear upward trend.  With actual CPI inflation moving above 2% it is only a matter of time before the survey measures show that as well.

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.