Fixed interest watchlist for fixed interest investors in 2014
Continuation of a theme in December...
NZ and global interest rates continued to drift higher in December, continuing the theme of 2013. The NZ 2 year interest rate swap ended the year at a high of around 3.85%, up around 15 basis points on the month. The US 10 year government yield ended the year at around 3.0%, the highest point in the year.
The main event in December was the NZ Treasury’s half yearly fiscal and economic update. An improved fiscal outlook resulted in a reduction in the NZ government bond issuance program by $4bn. Combined with the usual suspension of government bond tenders over the Christmas/New Year period, this created a scarcity bid for NZ government bonds in December.
Fixed interest returns in 2013…
It was an eventful year for fixed interest investors in 2013. Global yields rose notably as the US Federal Reserve hinted at the prospect of tapering QE purchases. Local fixed interest yields rose even further, as the economy gained momentum and the market began to price-in upcoming Official Cash Rate (OCR) hikes from the RBNZ. With the economic outlook improving and policy stimulus continuing, corporate bonds outperformed government bonds.
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End 2012 Yield (%)
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