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STIR
After shunting 20bp higher across meetings yesterday, RBNZ dated OIS pricing today is 1-5bp softer across meetings with 19bp of tightening priced for the May meeting. 41bp of easing is priced for Feb-24 off a terminal OCR expectation of 5.46% (July).
- Most economists expect another 25bp hike in May after RBNZ looked through Q4 GDP weakness at yesterday's meeting to persistently high inflation, demand still outstripping supply and the impact on inflation expectations from the cyclone recovery. Lower wholesale rates appeared to also weigh on the decision.
- Given the RBNZ's track record of overshooting OIS forward pricing, as illustrated in Figure 1, it seems that the market is taking the hawkish message from yesterday's 50bp rate hike and accompanying statement seriously. As a result, there are few indications today that investors are considering fading current market pricing for near-term meetings.
Figure 1: RBNZ OCR Vs. OIS 6M Fwd. (led 6M)
Source: MNI – Market News / Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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