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NZGBS: Yields Higher As Market Digests The RBNZ Decision


With little direction from U.S. Tsys, NZGBs open weaker with the market still digesting the RBNZ policy decision. Yesterday the central bank stayed on the hawkish path when it delivered the expected 50bp rate hike, left its peak OCR projection at 5.50%, albeit that is now seen slightly later (opening the way for a slowdown in the pace of hikes), and highlighted the likely inflationary impacts of Cyclone Gabrielle and the resultant rebuild. While the post-RBNZ move in NZGBs has been limited, yields across the curve sit some 25bp higher than Monday’s close after pre-decision comments by the NZ Treasury on RBNZ policy sparked an aggressive sell-off.

  • NZGB yields are 4bp higher across the curve with the NZ/US yield differential 5bp wider at 62bp.
  • Swap rates are also 4-5bp higher, in a parallel shift.
  • RBNZ dated-OIS opened firmer with the most significant move in the November meeting (+4bp) as the market prices out the chance of an easing this year. November pricing has an 8bp easing this year vs. 20bp earlier in the week. Terminal OCR pricing shows at just over 5.40%.
  • With the Antipodean calendar light today (Australian Q4 Capex the only release), the market will be watching to see if Australian rates can maintain yesterday's post-wages bounce. AU/NZ 2-year swap differential narrowed by 14bp yesterday.

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