Short rates range bound, but long rates rise steepening local curve. UST 10yr yields slip as markets sceptical of Trump tax plans

By Jason Wong

US Treasury 10-year yields have traded in a tight range, although have slipped to the bottom of the 2.31-2.35% band, following the tax reform announcement, indicating a lack of confidence that it will get passed in its current form and/or stimulate the economy.

The 2-year rate is unmoved at 1.27%.

The local yield curve steepened yesterday, with higher US rates since the pre-ANZAC day close putting upward pressure on the long end of the curve.

NZ’s 10-year bond rate rose by 6 bps to 3.08%, while the 10-year swap rate rose by 1.5 bps to 3.40%.  Some offshore receiving interest saw downward pressure at the short end of the curve, with the 2-year swap rate down 2 bps to 2.32%. 

The short end of the curve is likely to remain tightly range bound until the next RBNZ MPS on 11 May.

It’s a fairly action packed calendar ahead.  Before the NZ close we should see the BoJ leave policy settings unchanged, with inflation remaining well below target and little else it could do to ease policy further. 

The ECB’s policy announcement tonight will be a highlight, but the Governing Council is expected to keep guidance unchanged until June. 

German inflation is expected to rebound, while US sees durable goods and trade data.

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.