VIEW: ANZ Suggest That LSAP Purchases May Fall To 0 In Late Aug/Early Sep

On the LSAP scheme, ANZ note that "ceasing purchases soon may sound radical, and some in the market probably like the idea that the RBNZ has their backs, so to speak. But it is difficult to show that the reduction in purchases to date has had a meaningful impact on bond yields."

• "There are a number of paths the RBNZ might take from here. In our view, the most logical path is to reduce the LSAP by NZ$20mn per week until purchases cease during the last week of August/first week of September."
• "The pace of purchases is a staff decision, under delegated authority from the MPC, and given that the decision to slow purchases reflects good market functioning, we don't expect the market to be unduly affected by the RBNZ stepping back in this way. At the margin yields will likely rise a touch, but we don't expect the impact to be significant or long-lasting."
• "To be clear, we do not expect the LSAP programme to be cancelled. Rather, we expect purchases to be phased out (a staff decision) with the programme remaining in place in the background (an MPC decision), and for the MPC to remind the market that the capacity to re-enter the market remains in place, and can be called upon at any time between now and the end of June 2022."