All Eyes On The RBNZ Decision This Week

NZGBS and swaps open the RBNZ policy decision week unchanged after selling fatigue in U.S. Tsys delivered a modestly firmer close on Friday.

• After a 3-month hiatus all eyes will be on this week’s RBNZ decision to see whether the central bank continues with a 75bp hiking pace, slows to a 50bp step (now consensus), or surprises everyone with something less in lieu of the devastation of Cyclone Gabrielle (only an outside chance is seen there). The market will also be looking for any shifts in the Bank's outlook given the aggressive tone deployed ahead of its the break & in the wake of the cyclone.
• Pricing for this week’s RBNZ-dated OIS opened little changed, showing ~45bp of tightening after printing as high as 62bp early last week. The sentiment shift can be traced back to signs of moderation in the RBNZ’s Survey of 2-year inflation expectations. Terminal rate expectations have opened around 5bp lower at ~5.26%, adding to the slide from last week's high of 5.50%.
• Finance Minister Robertson has estimated the cost of repairing cyclone damage at ~NZ$13bn, although that won't all fall at the feet of the government, with insurers set to cover a portion of the burden.
• Locally, NZ Resident Bond Holdings data is released today with Q4 PPI tomorrow.