March 17, 2023 00:22 GMT
RBNZ Dated OIS Pricing A 25bp Hike in April
STIR
RBNZ dated OIS has firmed 13bp across meetings today in line with global STIR developments overnight. The ECB’s decision to go through with a 50bp hike despite global banking concerns supported the STIR re-pricing.
- RBNZ dated OIS pricing shows April meeting back at 28bp of tightening with terminal OCR expectations at 5.32%.
Figure 1: RBNZ Dated OIS: Today Vs. Yesterday
Source: MNI – Market News / Bloomberg
- The willingness of NZ STIR to price a 25bp hike for April versus no change in AU STIR is noteworthy particularly given the data this week has been strong in Australia and weak in NZ.
- In Australia, NAB business conditions and employment both surprised on the upside whereas weaker-than-expected Q4 NZ GDP put the economy on recession watch.
- While GDP data (-0.6% Q/Q) was weaker than analysts expected, it was much weaker than the RBNZ’s forecast of +0.7% Q/Q. On the surface, the data supported a tightening pause in April, but that assessment would have ignored recent volatility in GDP data.
- Market pricing suggests the RBNZ is likely to want clearer signals that it has done enough in its fight against capacity constraints and inflation before halting tightening.
- The RBNZ’s recent performance as an overshooter of OIS forward pricing (Figure 2) appears to have put weight behind its hawkish rhetoric since its February MPS.
Figure 2: RBNZ OCR Vs. OIS 6M1M (led 6M)
Source: MNI – Market News / Bloomberg
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