RBNZ-Led Richening Results In Further Bull Steepening

A bid has come back in after the space initially showed lower on the RBNZ’s 50bp OCR hike (vs. sell-side consensus of 25bp & pre-decision market pricing of ~42bp of tightening). The RBNZ language that we flagged re: comfort with its Feb OCR track (a potential hat tip that the OCR track priced into the OIS strip may be getting ahead of itself) and the Bank highlighting that a larger move now provided future optionality against high levels of global uncertainty (alongside a focus on combatting rising long-term inflation expectations), as opposed to scope for more than previously envisaged tightening, has allowed support to come back into the space. YM breached its overnight session peak on trans-Tasman spill over as NZGB yields & NZ swap rates fell. The front-end led nature of the move has extended the bull steepening flagged earlier, with YM +12.5 and XM +5.0.