WELLINGTON, Oct. 5 (Xinhua) — Stronger-than-expected U.S. economic performance is putting upward pressure on New Zealand mortgage rates as higher U.S. bond yields have pushed up New Zealand wholesale swap rates, a key benchmark for fixed mortgage rates, Kiwibank said on Monday.
Strong U.S. economic performance could lead financial markets to price in higher interest rates, with expectations for rates to remain higher for longer, the New Zealand state-owned bank said in its weekly economic commentary.
As a small economy, New Zealand’s wholesale funding costs are influenced by international developments, with higher U.S. bond yields pushing up New Zealand wholesale swap rates, which can mean higher fixed mortgage rates, Kiwibank said, adding that wholesale interest rates tend to move together globally, particularly at the long end of the curve.
Interest rates have risen sharply around the world, with U.S. rates at their highest level in 25 years, Kiwibank said, noting the difference between New Zealand’s two-year and 10-year government bond rates has widened from 100 basis points in May to 120 basis points.
It said the weaker New Zealand dollar, which has fallen below 56 U.S. cents, could benefit the economy by supporting exports and making New Zealand cheaper for foreign investment and purchases. ■