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NZGBS: Cheaper After The RBNZ’s Hawkish Hold


NZGBs closed 1-2bps richer, flat to 6bps cheaper than the session's best levels, after the RBNZ decision and statement. The RBNZ left rates at 5.5% as was widely expected but given the statement and forecast revisions, it was a hawkish hold. The impact of strong population growth has become “apparent” and it is “increasing the risk of inflation remaining above target”.

  • The MPC noted that it “would likely need to increase” rates again if inflation is higher than expected. Given it said inflation remains too high and price and demand indicators will be key to the NZ rate outlook.
  • Elsewhere, NZ PM Luxon will introduce legislation to narrow the RBNZ’s mandate in the first 100 days.
  • The swap curve has twist-flattened, with rates 6bps higher to 4bps lower. Rates are 2-10bps higher since the RBNZ decision, with the 2s10s curve 8bps flatter.
  • RBNZ dated OIS pricing closed 1-7bps firmer across meetings.
  • Tomorrow the local calendar sees Building Permits and ANZ Business Confidence.
  • Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 4.5% May-30 bond, NZ$250mn of the 2.0% May-32 bond and NZ$50mn of the 2.75% May-51 bond.
  • Later today sees the second Q3 US GDP release before Fedspeak from Fed Mester and the Fed’s Beige Book.

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