NZGBS: Market Settles on a 50bp Hike From The RBNZ

NZGB yields open 1bp higher after U.S. Tsy futures weakened in a narrow range. Cash Tsys were closed for the Presidents Day holiday.

• NZ 2s10s swap curve opens 7bp more inverted with the 2-year rate 5bp higher and the 10-year -2bp.
• Debate remains over the size of RBNZ hike this week, with UBS becoming the first to adopt an RBNZ pause due to Cyclone Gabrielle as its base case. With the note released around the local market close its impact, if any, should be clearer this morning. Potentially limiting its impact will be the fact that Finance Minister Robertson yesterday appeared to push back on the ‘no hike’ option stating that the Reserve Bank, within its mandate, can look through current events. The market seems to have settled on a scaled-down 50bp (after a 75bp hike in November) with RBNZ-dated OIS holding at ~46bp of tightening. Terminal OCR expectations (July/Aug-23) have added 1bp to yesterday’s +5bp to sit at ~5.30%.
• Elsewhere, PM Hipkins yesterday announced a NZ$300mn Cyclone Emergency Support Package targeting road rebuilding, and business and primary sector support, costs will increase in the coming weeks (NZ$13bn has been earmarked as an initial estimate, albeit with insurers covering some of that).
• Q4 PPI headlines today's local docket.