Pricing for Fed hikes nudge up. Long end declines flatten yield curves. NZ 10yr at fresh low for year. US politics garner more attention than deserved

By Jason Wong

Stronger US data and a belief that economics will ultimately prevail over politics, as long as there is no crash in markets, have seen Fed pricing for hikes nudge up and a flattening of the US yield curve. 

The US 2-year Treasury rate is up 2 bps to 1.27%.

After falling to as low as 2.18% last night, the 10-year rate has pushed higher and sits this morning at 2.23%, flat for the day and close to the level at the NZ close.

NZ’s yield curve flattened yesterday, but it was all driven by the long end of the curve, reacting to the overnight session in the US.

One strong bid took out the government’s $150m tender of 2025 bonds at a below-market yield of 2.695%. 

The 2-year swap rate was flat for the day at 2.23%, anchored by an outlook of steady monetary policy, while the 10-year swap rate fell by 5 bps to 3.24%, a fresh low for the year.

With little on the economic calendar today, US politics is likely to garner more attention than it deserves and impact market sentiment.

Daily swap rates

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