NZGBS: Richer After The RBNZ Hold

NZGBs are 2-3bps richer after the RBNZ leaves the OCR at 5.50%. To summarise the statement:

• The current interest rates are curbing economic activity and mitigating inflationary pressures as needed. Economic demand growth is diminishing, and while GDP growth in the June quarter surpassed expectations, the overall outlook remains subdued.
• Globally, economic growth is below average, with easing inflation among trading partners. This global slowdown affects NZ's export volumes and prices, except for oil.
• Maintaining a period of subdued activity is necessary to alleviate inflationary pressures. However, there is a short-term risk of insufficient slowing, while medium-term concerns relate to a global demand slowdown and its impact on commodity prices and exports, particularly in China.
• The Committee emphasised the need to maintain a restrictive OCR to achieve the 1 to 3% inflation target and support sustainable employment.
• Swap rates are 3-4bps lower after the RBNZ decision to be 2bps lower to 4bps higher on the day. The 2s10s curve has twist-steepened.
• RBNZ dated OIS pricing is 2-7bps softer across meetings beyond October. The market had a 17% chance of a 25bp hike priced for today.