US economy 'broadly improving'. Aussie inflation a touch higher. Stevens' speech gets attention. Markets await RBNZ

By Raiko Shareef

It was an uninspiring day in the local rates markets, with investors holding their breath ahead of today’s OCR decision.

Overnight, short-end US bond yields edged higher on positive economic news.

The local interest rate curve shuffled lower marginally yesterday, with the 2-year swap yield down 2 bps to 2.87%.

The market prices in a roughly 10% chance of a 50 bps cut at this morning’s RBNZ meeting.

The only notable piece of US data out overnight was the existing home sales report. The annualized rate of home sales rose to the quickest since the GFC. The housing market is a clear bright spot in a broadly-improving US economy.

The US 2-year government bond yield rose 3 bps to 0.71% after the data. The 10-year bond yield was unchanged at 2.32%.

Australia’s CPI report yesterday offered few surprises. The headline measures of inflation undershot market expectations a touch. However, the annual pace of core inflation printed slightly higher. These data provided little to change any existing views on RBA policy, and the market was little changed. More attention was paid to RBA Governor Stevens’ speech.

After the RBNZ today, the market will be looking to retail sales reports out of the UK and Canada, as well as some mid-tier US data.

—————————

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

Daily swap rates

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for(i=0;i

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