NZGBS: Bull-Steepener Ahead Of Next Wednesday’s RBNZ Policy Decision

NZGBs closed on a positive note, with benchmark yields 2-5bps richer and the 2/10 curve steeper.

• Swap rates closed flat to 4bps lower.
• Next week, the local calendar is empty on Monday, ahead of Net Migration data on Tuesday and the RBNZ Policy Meeting on Wednesday.
• (MNI) The RBNZ's monetary policy committee is likely to hold the official cash rate at 5.5% when it meets next week, but it will debate a cut and inject greater dovish language into its communications as it prepares for reductions later this year.
• The economy has slowed and inflation moved towards the RBNZ’s 1-3% target faster than expected in Monetary Policy Statement (MPS) forecasts in May. However, the Reserve’s past comments and its reduced mandate, which no longer requires it to target employment, suggest it will take a cautious approach to any rate adjustment and may wish to examine Q3 inflation and GDP before cutting the OCR.
• RBNZ dated OIS pricing closed little changed across meetings. The market has attached a 66% chance of a 25bp cut at the August Policy Meeting versus 43% before yesterday’s RBNZ inflation expectations data. A cumulative 90bps of easing is priced by year-end.
• (Bloomberg) "Finance Minister Willis may ask the RBNZ to ease its regulation on banks if it would improve competition in the industry, the NZ Herald reports." (See link)