10-Year NZGB Yield Prints Best Levels Since Nov As Hawkish RBNZ Bets Are Added

Participants have seemingly been adding some hawkish RBNZ bets today, with the implied change in the OCR come the end of February MPC meeting edging higher to nearly 30bp. It is the first time this year that money markets are pricing that much tightening in February, with modest upticks observed also further out the curve.

• Bloomberg have telegraphed an analytical note from ANZ, who said they now expect the OCR to peak at 3% by April 2023. They previously projected the OCR rising to a peak of 2% in 2H2022, but "domestic inflation pressures, and in particular the ongoing tightness in labour supply" prompted them to tweak their call.
• NZIER's Quarterly Survey of Business Opinion released yesterday underscored continued "acute labour shortages," which fuel a "lift in wage growth, and this is contributing to higher costs for businesses." The survey pointed to "inflation pressures in the New Zealand economy remaining strong over the coming year."
• Note that New Zealand's Covid-19 Response Minister Hipkins today suggested that the government could again delay border reopening, as officials rush to administer booster jabs to the population before Omicron penetrates the community. Pressing pause on border reopening would exacerbate existing labour shortages through a continued halt on the supply of foreign workers.
• The yield on the benchmark 10-year NZGB has climbed to its best levels since November and last sits just shy off there at 2.587%. The kiwi dollar is among the best G10 performers, with NZD/USD last +11 pips at $0.6781.