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NZGBS: Richer, 30% Chance Of A RBNZ Hike On Wed Is Priced

BONDS

NZGBs closed 3-4bps richer and near the session’s best levels. With the domestic calendar empty today, local participants appear to have taken their directional guidance from US tsys. After closing out last week with a solid bull-flattening of the curve, US tsys have extended those gains in today’s Asia-Pac session. Cash US tsys are currently dealing 1-2bps richer across benchmarks.

  • Swap rates closed 7bps lower, with the 2s10s curve little changed.
  • Ahead of the RBNZ Policy Decision on Wednesday, Bloomberg consensus is nearly unanimous (19 of the 21 surveyed economists) in expecting a no-change result for the OCR. Only ANZ and TD are calling for a 25bp hike to 5.75%.
  • Shadow Board members recommended the RBNZ keep the OCR at 5.5% this week, according to the NZIER.
  • RBNZ dated OIS pricing is 1-3bps softer across meetings. A 32% chance of a 25bp hike is priced for this week’s meeting, with an expected terminal OCR of 5.65% (a 61% chance of a 25bp hike) for the May meeting. A cumulative 40bps of easing is priced by year-end.
  • Tomorrow, the local calendar is empty.
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