NZGBS: Yields Higher & Close To Session Cheaps, RBNZ Policy Decision Tomorrow

NZGBs closed just shy of the session’s worst levels, with benchmark yields 3bps higher.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined NZIER Quarterly Survey of Business Opinion.
• Nevertheless, the local market's focus this week is on tomorrow’s RBNZ Policy Decision. We expect it to leave rates again at 5.5% where they have been since May last year. The RBNZ is firmly on hold and there appears to be a high bar for it to shift rates in either direction for now. Bloomberg consensus is also unanimous in expecting the OCR to be left unchanged. (See MNI Preview here)
• The April meeting will not include a forecast update or a press conference. We expect the statement to be in line with February’s softer tone with a moderate tightening bias retained.
• Swap rates closed 2-3bps cheaper, with the 2s10s curve flatter.
• According to RBNZ dated OIS pricing, there is only a 5% probability assigned to a 25bp rate hike tomorrow. However, what stands out more prominently is the indication that a cumulative easing of 59bps is still priced in by year-end.