You are using an older browser version. Please use a supported version for the best MSN experience.

NZ swap rates plunge over Brexit fears

NZ NewswireNZ Newswire 24/06/2016 Paul McBeth

British pound note and coins © Getty Images British pound note and coins New Zealand swap rates plunged as news of the likely victory for Brexit in the UK's referendum on whether to leave the European Union rippled through global financial markets and sent investors fleeing for safe havens.

The two-year swap rate dropped 14 basis points to 2.17 per cent and 10-year swaps sank 22 points to 2.64 per cent as investors grapple with the looming outcome of the UK referendum.

Investors had been picking a vote in favour of staying, but those expectations have been dashed as early results showed a much closer race with the 'leave' camp pulling away as more of the vote was counted.

"We'll be pricing a sub-2 per cent OCR (official cash rate) for sure - this might well be enough to tip the Reserve Bank's hand come August," said Imre Speizer, senior market strategist at Westpac. "We don't know how messy this could get - it's not so much the direct impact on the UK and on the rest of the world, which is pretty small beer, it's the contagion effect if the eurozone starts looking like splintering."

The Reserve Bank held off cutting the OCR at this month's meeting, saying this year's schedule meant a full monetary policy statement was in August and gave policymakers time to wait for data including first quarter gross domestic product and second quarter inflation.

Federal Reserve chair Janet Yellen this week said the world's biggest central was watching the outcome of the 'Brexit' vote.

The Guardian website has the 'leave' camp leading 'remain' 52 per cent to 48 per cent with 51 of the 382 local authorities still to declare.

The British pound traded between US$1.3312 and US$1.5015, slumping when it became clearer the vote would be a close run thing. It recently traded at US$1.3418. The kiwi jumped against the pound to 52.26 pence, the highest level since October 2013.

Stocks across Asia have also dropped, with New Zealand's S&P/NZX 50 index down 2 per cent to 6684.48, Australia's S&P/ASX 200 index falling 3.6 per cent to 5092.8, and Japan's Nikkei 225 index slumping 7.9 per cent to 14962.82.

image beaconimage beaconimage beacon