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Global bond yields collapse

Global bond yields collapsed in January, driven by a combination of lower oil prices, inflation concerns and bond buying by the European Central Bank.

Thursday, 5 February 2015

US 10-year bond yields fell by 53 basis points to 1.64% in January, the sharpest single-month fall since 2011.

BNZ economists said that had put some downward pressure on local short-end swap yields but the bigger force in New Zealand markets was the speculation – proved accurate – that the RBNZ would put an end to its tightening bias for the OCR.

Yesterday’s LGFA bond tender was fully allocated for the lowest volume ever offered.

There was  $80 million on offer in 2023 bonds, for which $307 million in bids was received.

For 2020 bonds, $65 million was bid for the$20 million available.

There was $10 million available in both 2017 and 2019 bonds, for which $37 million and $39 million was bid respectively.

Settlement is February 10.

Westpac economists said: "The recent spate of international monetary policy easings, some via policy rates and some via balance sheet expansion, has fuelled a fresh wave of bond buying globally. New Zealand’s real yields are the highest in the OECD world by some margin, and thus attract attention. That highly-rated LGFA bonds continue to offer a spread over swaps will be seen by some as a global anomaly.”

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