By Kymberly Martin
It was a very quiet day in NZ markets as the market awaits Thursday’s RBNZ meeting.
The market continues to price around a 75% chance of a 25bps rate cut within the next 9 months. NZ swap yields remained little changed yesterday, around mid-range. The 2s-10s swap curve remains fairly steady at 108bps.
Today will once again be a matter of looking ahead to tomorrow morning’s RBNZ meeting, as there is an absence of NZ data releases. We expect the meeting will be a fairly steady-handed affair, not least as it will be Governor Bollard’s final meeting.
While equities markets rose last night, US and German ‘safe haven’ yields remained fairly steady. With US 10-year yields creeping up to 1.69% the NZ-US 10-year differential has narrowed to 189bps. This is now closer to the bottom end of their range, suggesting only a little further narrowing should be expected.
It is likely to be a fairly unexciting day in NZ markets today, ahead of the German Court vote tonight, and tomorrow morning’s RBNZ meeting.
In the RBNZ’s Monetary Policy Statement we expect it to show the next move to the OCR is still up. However, it is likely the implied starting point will be pushed back later into 2013. This is consistent with expectations for US Federal Reserve tightening that have also been consistently pushed back.
At Thursday night’s FOMC meeting the Fed may indeed suggest the starting point of any tightening is even later than previously stated i.e rates to remain at extremely low levels ‘at least through 2014’.
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In the RBNZ’s Monetary Policy Statement we expect it to show the next move to the OCR is still up. However, it is likely the implied starting point will be pushed back later into 2013. This is consistent with expectations for US Federal Reserve tightening that have also been consistently pushed back.
At Thursday night’s FOMC meeting the Fed may indeed suggest the starting point of any tightening is even later than previously stated i.e rates to remain at extremely low levels ‘at least through 2014’.
Just further reinforcement that the official economic growth forecast is negative to flat. - business unfriendly to say the least.
Not so for habitual gamblers wishing to speculate in non-productive housing investments along with those desperate to gain some income of any kind on their savings and build pension assets.
An unenviable legacy if the truth is to be found in this analysis.
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