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Cyclone Recovery Task Force Announced


NZGBSs were virtually unchanged at the close with early strength given up as U.S. Tsy futures slid.

  • Swaps were mixed on the day with the 2-year rate 5bp higher and the 10-year rate -2bp.
  • Awaiting the RBNZ’s first-rate decision since November, UBS became the first sell-side name to adopt the base case of the RBNZ pausing its tightening cycle this week to assess the implications of Cyclone Gabrielle. RBNZ-dated OIS covering this week's meeting was was little changed, showing ~46bp of tightening, with suggestions that the UBS note came out near/after the local market close. Terminal OCR expectations were higher today, closing +5bp at ~5.29%.
  • Elsewhere, PM Hipkins announced a Cyclone Recovery Task Force and a Cyclone Support Package. He also said he would consider possible wage subsidies and changes to immigration settings. Earlier, Finance Minister Robertson estimated the cost of cyclone repair at ~NZ$13bn, with insurers set to cover a portion of the burden.
  • Note that Robertson also stressed the need for the RBNZ to combat inflation, with a mandate that gives the Bank the capability to look through current events. It seems as if he was trying to dispel the idea of no move at the upcoming meeting, with the inflationary environment very different to what was seen at the time of the ’11 earthquake (which triggered a 50bp cut from the RBNZ).
  • PPI data headlines tomorrow's local docket.

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