sign up log in
Want to go ad-free? Find out how, here.

Markets now expecting NZ OCR hikes to 4.25% by 2017 after restart in rises in late 2015; ECB TLTRO offer spurned

Bonds
Markets now expecting NZ OCR hikes to 4.25% by 2017 after restart in rises in late 2015; ECB TLTRO offer spurned

By Kymberly Martin

The NZ swap curve flattened yesterday.

Overnight, US 10-year yields pushed up from 2.14% to 2.21%

Yesterday morning the RBNZ largely delivered on our expectations. It maintained a subtle tightening bias, but flattened its projected 90-day bank bill track.

The track now implies a first OCR hike around the turn of 2015/2016. It also implies the OCR peaks at 4.25% by late 2017 (previously 4.50%).

Recall, ahead of the meeting  the market already priced an OCR that only reaches 4.0% in this cycle.

Therefore there was not a sharp reaction in NZ short-end yields. In fact, 2-year swap closed virtually unchanged at 3.83%.

Meanwhile long-end yields followed the previous night’s offshore moves lower. 10-year swap closed down 3 bps, at 4.26%. The yield on NZGB23s closed down 4 bps, at 3.78%, its lowest level since June last year.

Overnight, the ECB undertook its second round of lending under the TLTRO (targeted longer-term refinancing operation). Banks borrowed just €130 bln of a possible €317 bln. The limited uptake (though widely expected) adds strength to the calls for the ECB to undertake full-blow QE (purchasing sovereign bonds) as soon as possible. German 10-year bonds continue to hover near historic lows, at 0.68%.

Meanwhile, US equivalents rebounded after the release of stronger than expected Nov US retail sales data, to trade around 2.21% currently.

This will likely prompt some early steepening of the NZ curve today. Domestically we have the BNZ Manufacturing PMI to look out for.

Today the DMO will tender NZ$300m of NZGB27s (delayed to Friday due to yesterday’s MPS).

 
 
 
 
 
 
 
 
 
 

Daily swap rates

Select chart tabs

Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA
Opening daily rate
Source: NZFMA

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.