NZ interest rates followed the dip in Treasury yields, with longer-end rates falling by 3 bps.
US bond yields continued to dip lower overnight, as US economic data disappointed.
Yesterday’s Budget saw a widely-expected nudge higher in the DMO’s bond purchase programme, to the tune of $1 bln for 2015/16 only.
The Budget provided few surprises to markets, with the Government’s mission to surplus delayed.
We are a little sceptical of the Treasury’s growth forecasts, which are a slightly rosier than our own. Treasury anticipates growth to average around 3.0% per annum, relative to our own belief that the economy slows down to about a 2.0% annual pace by 2016/17.
The forecasts also imply an OCR that remains steady, and even rises slightly in a couple of years’ time. Investors might be tempted to read into this as a hint of the RBNZ’s intentions at the June MPS, but we would warn against that.
These forecasts were finalised on 10 April, well before RBNZ Assistant Governor McDermott signalled the shift to an easing bias in late April. In addition, even if Treasury knew the RBNZ’s plans (which we doubt, since the RBNZ seems unsure itself), it would hardly go about stealing the RBNZ’s thunder ahead of the 11 June meeting. We see the RBNZ on hold at that meeting.
US Treasury yields slipped further overnight, down by 6 bps at the 10-year mark to 2.19%, but this could quite quickly be reversed by tonight’s events. Should Fed Chair Yellen confirm the FOMC continues to believe the Q1 slow-down was temporary, we might expect Treasury yields to climb back toward 2.30%.
Locally, today’s ANZ consumer confidence survey is unlikely to be market-moving.
The Bank of Japan decision will be worth keeping half an eye on, given the rising risk that Governor Kuroda will finally feel compelled to expand the easing programme, to arrest falling inflation.
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Raiko Shareef is on the BNZ Research team. All its research is available here.
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The Bank of Japan decision will be worth keeping half an eye on, given the rising risk that Governor Kuroda will finally feel compelled to expand the easing programme, to arrest falling inflation
Does anybody take anything he says seriously?
The Nikkei 225 recently hit a 15 year high - how much asset inflation can a nation endure while failed policies continue to not deliver that which has been promised for at least a decade?
It's past time incompetent, but well intentioned academics are allowed to practice industrial size money fabrication theories without censure from those with better records of financial understanding. Read more
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