The days of low fixed mortgage rates are probably coming to an end if action in the wholesale interest rate markets is any guide.
Banks price their fixed-rate retail mortgages from the relevant fixed-rate term in the wholesale markets.
Harbour Asset Management head of fixed interest portfolio management Mark Brown says worries that the US Federal Reserve will stop printing money soon have pushed up bond yields around the world, including in New Zealand.
He says New Zealand 10-year bond yields have risen by nearly a percentage point since early May.
Mr Brown says investors are mindful that interest rates have been very low for some time but that at some stage, as economies recover, interest rates will rise and that has an influence on people's desire for longer-term fixed interest securities.
He says for the last 18 months, with the exception of the latest tender, the Local Government Funding Authority has had about four times as many bids for each dollar of bond on offer than it's needed.
But Mr Brown says this week's $285 million local government bond tender attracted only about twice the number of bids needed and prices bid were defensive.
"So it sort of highlights the market conditions to us because credit itself, from our point of view, is really strong, it's very well supported in the local market.
"For there to be something of a no-show at a tender really just shows the state of the market itself."
Mr Brown says the demand from the market for the bonds is usually very much in line with prevailing market yields, but in the latest tender some bids were 0.3% behind market yields to get the full amount sold.