ECB Set to Raise Interest Rates as Energy Shock Fuels Eurozone Inflation Concerns 
Elon Musk is remaking the world, like Henry Ford before him – but more dangerously 
Morgan Stanley Names BAE Systems Top European Defence Stock Despite Lower Price Target 
Fed Chair Kevin Warsh Signals Policy Overhaul as Hawkish Rate Outlook Rattles Markets 
In a rebuke to Trump, the Supreme Court rules that birthright citizenship is the law of the land 
China Keeps Loan Prime Rates Unchanged for 13th Straight Month as Policymakers Prioritize Credit Demand Recovery 
Trump has made more than $1 billion from crypto in a year. How? 
Vietnam’s population hit the 100 million milestone. Where’s it headed? 
Gold Surges Past $4150 on Dovish Fed Signals and Weak Jobs Data; Bullish Outlook Prevails 
RBA Minutes Signal Australia Central Bank Remains Ready to Raise Interest Rates if Inflation Persists 
BOJ Signals More Rate Hikes as Inflation Risks Rise Amid Energy Price Pressures 
As you all know by now both central banks in US and New Zealand territory have maintained status quo in their monetary policy decision, fed’s funds rate at 0.50% and RBNZ’s OCR at 2.25%.
But, there were both dovish and hawkish tweaks from both Fed and RBNZ, but beyond the usual knee-jerk volatility the US dollar is unchanged. The AUD continued to reel from its CPI data shock, and the NZD was sold ahead of the RBNZ.
The next Fed hike is fully priced for Feb 2017, with June 2016 still given around a 20% chance.
US treasury yields declined after the Fed statement noted slowing economic activity and no longer mentioned inflation picking up.
The US 10Y treasury yield slid from 1.91% to 1.88% as FOMC maintains status quo, and further to 1.85% post-announcement.
The 2Y was more restrained, ranging between 0.84% and 0.85% pre-FOMC and slipping to 0.83% afterwards.
Having risen above 1.90%, the 10yr treasury yield fell to 1.81%, but it edged higher following the Bank of Japan announcement of no policy easing.
The fall in US yields will probably follow through to the bund and gilt markets today. Bund yields could be weighed further if German inflation surprises on the downside.
Although markets have fully priced in a 2.0% OCR, they are aware the risks for the RBNZ are mainly to the downside and see potential for the OCR to fall below 2.0% if global shocks materialise.
The 2yr should drift towards 2.20%, while the 10yr will be driven more by Fed behaviour and should trade around 3.00%. The curve should steepen.
With 10-year swap rates close to record lows, it is difficult to argue that fixing now does not offer good value from an historical perspective. However, rates could move lower still, especially for tenors out to 5 years.
