Record low interest rates and yields both locally and internationally. US energy debt defaults catch market attention

By Jason Wong

There was downward pressure on US rates during the Asian trading session and those forces have continued overnight, with the US 10-year rate currently trading at its low of the day at 1.69%, down 6 bps for the day.

Even the strong durable goods orders data couldn’t lift yields.  It seems that US Treasury yields are being dragged lower by global forces, with Germany and Japan rates still heading lower.

In the headlines was Japan’s 40-year bond falling below 1% for the first time, a remarkable achievement.

The market still believes that further tightening by the US Fed remains a distant prospect.  The OIS market now implies a less than one in three chance of another tightening this year.

A couple of missed coupon payments by two of the larger oil and gas drillers – Energy XXI and Sandridge Energy – got the market’s attention.  They have a combined $7.6 bln of debt and the prevailing view is that is the beginning of a likely wave of defaults for US oil producers over the coming year or two. 

The downward pull of global forces and increasing conviction that the RBNZ will ease policy again this year continue to result in lower NZ rates.  Another day, another fresh low in the 2-year swap rate, which closed down 2.5bps at 2.425%.  The whole swap curve was down 2 bps from 3-years out.

The NZ 10-year government bond yield (2027) fell 3 bps to 2.98%, a record low.  The first tender of 2033 bonds attracted $370m of bids for the $100m on offer.  These went out at a weighted average yield of 3.31% and in the market the bond closed down 3 bps at 3.29%. Based on overnight trends, the pressure on local rates will remain to the downside.

Coming Up

The G20 Finance Ministers and central bank governors meeting kicks off today in Shanghai.  Expectations for any coordinated policy effort are low, but expect the Statement to mention some warm fuzzies on countries not engaging in competitive devaluations.  On the data front inflation data in Japan, Germany and the US are the highlights.

Daily swap rates

<!–

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var chart_title_arr= ["Swap rate","Swap rate","Swap rate","Swap rate","Swap rate","Swap rate","Swap rate"];
var chart_subtitles_arr= ["Opening daily rate","Opening daily rate","Opening daily rate","Opening daily rate","Opening daily rate","Opening daily rate","Opening daily rate"];
var tab_titles_arr= ["1 year %","2 years %","3 years %","4 years %","5 years %","7 years %","10 years %"];
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var timestamday = 86400000;
var timestammonth30 = 2592000000;
var timestammonth31 = 2678400000;
var timestamyear = 31536000000;
var timestamquarterly = 7776000000;

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var mm = fomat.substring(k1+1,k2);
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var c_year=Number(current_year.substring(2,4));
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var mm2 = time4.getMonth();
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var ahref_title=”Click here for full story”;
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mm2 = “Jul”;
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arr[i][1]=null;
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// conversion of months into numerical form

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else if (mm == "Sep")
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mm= "11";
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else if (mm == "Dec")
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var time4 = new Date(timestam);
var Weeko = time4.getDay();
var dd2 = time4.getDate();
var mm2 = time4.getMonth();

var yy2 = time4.getFullYear();
var yy3 = yy2+"";
var yy4= yy3.substring(2,4);
//++++++++++++++++++++++++this for days conversion++++++++++++++++++++++++++++
if (Weeko==1)
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else if (Weeko==2)
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else if (Weeko==3)
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Weeko = "Wed";
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else if (Weeko==4)
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Weeko = "Thu";
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else if (Weeko==5)
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Weeko = "Fri";
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else if (Weeko==6)
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Weeko = "Sat";
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else if (Weeko==0)
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Weeko = "Sun";
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//+++++++++++++++++++++++this is for month conversion+++++

if (mm2==0)
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mm2 = "Jan";
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else if (mm2==1)
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mm2 = "Feb";
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else if (mm2==2)
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mm2 = "Mar";
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else if (mm2==3)
{
mm2 = "Apr";
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else if (mm2==4)
{
mm2 = "May";
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else if (mm2==5)
{
mm2 = "Jun";
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else if (mm2==6)
{
mm2 = "Jul";
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else if (mm2==7)
{
mm2 = "Aug";
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else if (mm2==8)
{
mm2 = "Sep";
}

else if (mm2==9)
{
mm2 = "Oct";
}

else if (mm2==10)
{
mm2 = "Nov";
}

else if (mm2==11)
{
mm2 = "Dec";
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//++++++++++++++++++++++++++++++++++++++++

//weekly
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fomat2=dd2+"-"+mm2+"-"+yy4;
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// Daily
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fomat2=mm2+”-“+yy4;
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fomat2=mm2+”-“+yy4;
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var decpad;

decpad = parseFloat(arr[i][1]);
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arr[i][1] = decpad;
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var xvalu=dd2+”-“+mm2+”-“+yy4;
var yvalu= String(arr[i][1]);
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updt=”Updated on “+xvalu;
}
}

}
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//other required functions

//chart configuration starts here

function getXMLHttpRequest(file) {

//var arrSignatures = [“MSXML2.XMLHTTP.5.0”, “MSXML2.XMLHTTP.4.0″,
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//for (var i=0; i < arrSignatures.length; i++) {

try
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return xmlhttp;
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function readCSV(locfile) {
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req.send("");
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lineCSV[lineCSV.length-1]=lineCSV[lineCSV.length-1].replace(/^s*|s*$/g,"");
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lineCSV[fstart]=lineCSV[fstart]+","+lineCSV[j];
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}
fstart=-1;
}
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fstart = (lineCSV[i].match(/^"/)) ? i : fstart;
}

var j=0;

for (var i=0;i<lineCSV.length;i++) {
if (lineCSV[i]!="-DELETED-") {
CSV[j] = lineCSV[i];
j++;
}

}

return CSV;
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function roundVal(val_num){
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return result;
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function setdecimalpoints(deca)
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return 2;
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else
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return 0;
}
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for(i=0;i

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