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BONDS: NZGBS: Rates Lower After RBNZ Goes By 50bps

BONDS
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NZGBs closed slightly off session bests, with benchmark bonds 1-2bps richer. 

  • The RBNZ increased its pace of easing by cutting the OCR 50bp to 4.75% today, as expected, after starting the easing cycle with 25bp in August. The MPC felt that “restraint” could be lessened as inflation is “within” the 1-3% target range and approaching the mid-point. It seemed to opt for an increase in the pace of easing to “avoid unnecessary instability” in the economy and markets. It noted that policy is still restrictive though.
  • The discussion was around whether to cut rates 25bp or 50bp but the MPC unanimously decided on the latter as that was “most consistent” with its mandate to maintain “low and stable inflation”.
  • RBNZ-dated OIS softened by 6-10bps following today's RBNZ policy decision.
  • Before the decision, markets had priced in a 72% probability (43bps) of a 50bp rate cut, with 88bps of total easing expected by year-end and 127bps by February 2025. Those figures have shifted to 98bps by year-end and 137bps by February (including today’s 50bps).
  • Tomorrow, the local calendar will see the NZ Government's 12-month Financial Statements alongside the NZ Treasury’s planned sale of NZ$200mn of the 0.25% May-28 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.
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NZGBs closed slightly off session bests, with benchmark bonds 1-2bps richer. 

  • The RBNZ increased its pace of easing by cutting the OCR 50bp to 4.75% today, as expected, after starting the easing cycle with 25bp in August. The MPC felt that “restraint” could be lessened as inflation is “within” the 1-3% target range and approaching the mid-point. It seemed to opt for an increase in the pace of easing to “avoid unnecessary instability” in the economy and markets. It noted that policy is still restrictive though.
  • The discussion was around whether to cut rates 25bp or 50bp but the MPC unanimously decided on the latter as that was “most consistent” with its mandate to maintain “low and stable inflation”.
  • RBNZ-dated OIS softened by 6-10bps following today's RBNZ policy decision.
  • Before the decision, markets had priced in a 72% probability (43bps) of a 50bp rate cut, with 88bps of total easing expected by year-end and 127bps by February 2025. Those figures have shifted to 98bps by year-end and 137bps by February (including today’s 50bps).
  • Tomorrow, the local calendar will see the NZ Government's 12-month Financial Statements alongside the NZ Treasury’s planned sale of NZ$200mn of the 0.25% May-28 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.