N.Z. Swap Rate Is Near Highest Since 2011 Amid Property Demand

New Zealand’s two-year swap rate was near the highest since 2011 after a private report showed housing prices remained close to an all-time high in the South Pacific nation.

The Reserve Bank of New Zealand reiterated last month that it doesn’t want to see financial or price stability compromised by excessive housing demand. The Australian dollar declined against all 16 major peers after posting the biggest weekly advance in more than a year.

“New Zealand’s strong property market is a reason for higher swap rates,” said Akira Takei, the head of the international fixed-income department in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $39 billion. “Cutting interest rates may be desirable for New Zealand’s policy makers to weaken the currency and boost exports, but they can’t.”

New Zealand’s two-year swap rate was at 3.41 percent as of 9:41 a.m. in Sydney after touching 3.43 percent on Aug. 9, the highest since September 2011. The contracts allow investors to exchange a floating rate with a fixed one or vice versa.

New Zealand’s currency was little changed at 80.31 U.S. cents, while the Aussie fell 0.2 percent to 91.86 U.S. cents. The kiwi climbed 2.6 percent and the Aussie jumped 3.4 percent last week, the biggest gain for both currencies since December 2011.

The Real Estate Institute of New Zealand said today that its property-price index was at 3,669.1 last month. While it fell 0.5 percent from a month earlier, it’s still near the record high of 3,686.9 set in May.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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