Kiwibank Says US Bond Yields Push Up New Zealand Mortgage Rates

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Kiwibank said on October 5 that a stronger-than-expected US economy is creating upward pressure on New Zealand mortgage rates, as rising US government bond yields have pushed up swap rates in New Zealand's financial markets, a key reference rate for fixed mortgage rates. In its weekly economic analysis report, Kiwibank said the strength of the US economy may lead financial markets to absorb expectations of higher interest rates, amid forecasts that rates will stay elevated for longer. As a small economy, New Zealand's funding costs are influenced by overseas developments, and financial market interest rates tend to move in the same direction globally, especially long-term rates. Kiwibank also noted that US interest rates have surged to a 25-year high, and the spread between New Zealand's 2-year and 10-year government bond yields has widened from 100 basis points in May to 120 basis points. Meanwhile, the New Zealand dollar's decline below 56 US cents could benefit the New Zealand economy by supporting the export sector and making investment and purchases of goods and services in New Zealand cheaper for foreigners.

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KiwibankPrivate± Mixed
Monetaryrelevance

Kiwibank is the author of the analysis; it notes higher mortgage rates and a weaker NZD, a mixed signal for the bank itself.

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