NZ rates curve steepens, responding to Chinese PMIs. All eyes now firmly on the US non-farm payrolls report

By Raiko Shareef

The NZ rates curve steepened a touch yesterday, while a positive set of China PMIs prevented a deeper slide in the short-end of the curve.

US rates continue to drift lower in a defensive risk market, but 10-year yields steadied above 2.00%.

Local rates steepened slightly, pivoting around the 2- to 3-year mark. The 2-year swap yield suffered under the weight of those steepening trades, dropping down to 2.69% before recovering after the better-than-expected China PMI readings.

Global bonds benefited from modest risk aversion, as equity markets reversed some of the large gains seen on the last day of Q3. The US 10-year bond traded down to within a whisker of 2.00%, but has since lifted to 2.03%. That 2.00% mark provides some strong support, thanks to a failure to close below that level in late August, despite intraday trading down to 1.90%.

However, a weak outcome in tonight’s US employment reports might be the catalyst for yields to sink below 2.00%. The market is looking for a 201k gain in non-farm payrolls, an unemployment rate steady at 5.1%, and for wage growth to accelerate to 2.4% y/y. The Australia retail sales report could have some bearing on local rates.

—————————

Raiko Shareef is on the BNZ Research team. All its research is available here.

Daily swap rates

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