NZGBS: Subdued Initial Reaction To RBNZ Decision

A subdued initial reaction from NZGBs and swaps as the RBNZ delivers on the expected 50bp rate hike and flags a peak OCR of 5.50% in Q4 2023 (no change in peak level). While the RBNZ noted tentative signs of easing price pressures, they still see demand outpacing supply. The RBNZ still expects a recession to start in Q2 2023. The RBNZ reaffirmed its determination to achieve its inflation remit with inflation returning to within the target band by Q3 2024. The RBNZ also noted it was too early to assess the impact of the cyclone on policy.

• NZGB yields and swap rates are unchanged to 2bp lower from pre-decision levels.
• RBNZ-dated OIS was unchanged on the decision with terminal rate expectations at ~5.35%.