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- Wednesday's Top 10 with NZ Mint 43
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Market pricing in 80% chance of OCR being 25bps higher in 12 months’ time; highest expectation since April 2012
By Kymberly Martin
NZ swaps closed up a further 3-4bps. Overnight, US 10-year yields attempted another assault on the 2.0% level.
Since early December, NZ short-end swap yields have stealthily moved 40bps higher. 2-year swaps have moved from 2.55%, to close at 2.95% yesterday.
While a return to the December bottom of the trading range now looks less likely, it is difficult to see the imminent catalyst for a significant further rise in yields. But complacency should be avoided.
The market now prices an 80% chance of the OCR being 25bps higher in 12 months’ time. This is the highest expectations have been since April last year.
We continue to expect a first hike in December, with steady hikes throughout 2014. We see a 4.50% peak in the OCR in early 2015.
The 2-10s swap curve has steepened a little further to 113bps. Save a surge higher in US long-yields (that would drag up NZ long-yields) we would look to reposition for curve flattening as we approach 120bps.
Overnight, US 10-year yields attempted another break higher, this time touching above 2.02% before slipping back to 2.0%.
Related Topics
Today’s BNZ PMI will be released. December’s reading inched up to 50.1. A reading for January above 50 would show the manufacturing sector remains in expansion despite currency headwinds.
2 Comments
Hopefully we won't see the
Hopefully we won't see the OCR shift as you predict. Hopefully the RBNZ will have developed finer tools than gifting more profits to banks, in their attempts to stimulate localised areas of economy.
Just heard a bunch of morons are calling for a "basic wage" of $5 over minimum wage, as a target for "cost of living". That's the type of nonsense the RBNZ needs to be stopping at all costs.
The same idjits pushed for minimum wage $15 last election (and received a 50c increase). Now 2-3yrs later those same people have lifted their own predictions by $3 ! Don't they understand that the compounding effect? Don't they realise they are the very cause of the $3 increase - and that the poor people in NZ can't afford them to keep pushing up the bottom rung (and thus esculating all the prices above it!!).
The new $18 might give them more purchasing power at the supermarket, and a few dollars left after rent to save for a house of their own..... But the supermarket employs MANY low income people, so paying them more will put up grocery prices AND all the mid-level and top-level people will demand wages scaled to reflect their positions compared with the low income jobs.
If the wage is slightly higher, and significantly more people can sneak a grab at the bottom rung of the property ladder, then that increases the demand for the lowest end of the property market! That means higher prices, it also means rental tenants will bid for slightly better properties, and landlords will be able to charge more for whats left.
You push up the OCR, or push up "basic living wage" you WILL see essential cost of living jump. And it will jump more at the bottom end, where the people can least afford it.
What is needed is pushing down the lowest cost of living (basic staples), many of these things are not preferred by wealthy folk and it would allow more discretionary funds for those chosing lower cost of living (for whatever reason, and allowing choice fairly to all teirs of the financial spectrum). Give the people their corn, so that they may earn their cake.
What is needed is pushing
What is needed is pushing down the lowest cost of living (basic staples), many of these things are not preferred by wealthy folk and it would allow more discretionary funds for those chosing lower cost of living (for whatever reason, and allowing choice fairly to all teirs of the financial spectrum). Give the people their corn, so that they may earn their cake.
Nice sentiment - unfortunately some aspects impinge upon all our lives.
I was discusiing, with a local friend, the financial merits of hosting a web site @ home versus paying a third party to do so.
After some blog discussions with US parties he sent me this email:
Hello
I was just reading about the cost of running a server at home. With an
existing machine, power is by far the largest cost.
Our power is costing NZ$0.31 /unit. These guys in the US are currently
paying US$0.066 to US$0.08 /unit.
That's a big difference.
A couple of interesting notes:
My existing security video DVR (a P4 2.8G DELL) draws just over 100
watts. The new one (no installed yet) draws about 40 watts. A reduction
from $271 to $108 per year.
Hot water: To consume $100 worth of power/month at $0.31/unit, a 2.2KW
hot water element must run for 4.88 hours per day every day.