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STIR: RBNZ Dated OIS – RBNZ’s Track Record Taken Seriously

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

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