NZGBs Richer Despite RBNZ Debating 75bp Hike

NZGBs finished 16-18bp richer on Wednesday, bull steepening at the margin.

• Yesterday’s dovish RBA surprise provided the catalyst for the bid in early Wednesday trade.
• Later in the day we saw NZGBs initially cheapen as the RBNZ delivered the universally expected and fully priced 50bp rate hike (as it became apparent that 50 & 75bp hikes were discussed, indeed, the 50bp decision was made “on balance”), although the lack of a decisive hawkish shift (there was a high bar for such a move) allowed a bid to come back in.
• The RBNZ reiterated the need for tightening to be conducted at pace, while the proximity to yesterday’s dovish RBA surprise likely had some readthrough when it came to initial price action.
• There hasn’t been meaningful, lasting movement in the market pricing of RBNZ tightening expectations, with the terminal rate now seen at 4.55%, after some contained gyrations post-MPR.
• There isn’t much of note on Thursday’s local docket.