Rates as of 0500 GMT

Market Recap

NZD was the clear winner today but its hard to explain why. The currency was plunging on Friday morning when I took the rates and continued to plunge during the day, with both NZD and AUD hitting twoyear lows during the day. But then NZD recovered for some mysterious reason perhaps just a general recovery in risk sentiment, as exemplified by the SP 500?

Bond yields continue to decline

Although inflation expectations were mixed. Inflation expectations rose in New Zealand.

This adds to the mystery of NZDs outperformance why was it up so much when NZD real yields were down so much? Especially since the only currency whose real yields fell by more, GBP, was the worstperforming currency.

You can see what an outlier NZD was. The graph for 10year yields is pretty much the same.

I think one reason might be just people selling AUD chose to use AUDNZD to express their view. AUD was largely tracking the decline in copper. Copper, often seen as a bellwether of global economic activity, is now down 27 from its peak in early March.

Industrial metals fell last week as investors reassessed the outlook for global growth as I discussed at length Friday in my Weekly Outlook Recession risks outweigh tightening fears. In this atmosphere, NZD is likely to outperform AUD because demand for New Zealands agricultural commodities is less elastic than demand for Australias industrial commodities people have to eat but they dont have to buy a…