Taking their cue from Friday’s post-payrolls moves offshore, NZ swaps pushed higher across the curve yesterday.
NZ 2-year swap however closed only slightly higher, at 3.38%, as the market continues to prices almost 50 bps of RBNZ rate cuts within the year ahead.
The market prices around a 45% chance of a cut at Thursday’s meeting. We do not expect the Bank to deliver, though it may hint, via its published 90-day bank bill track, that rate cuts are possibly later in the forecast period.
NZ 10-year swap closed up 5 bps, at 4.12%. This is its highest level this year. The 2-10s curve has steepened further, to 73 bps. Although we expect further steepening over the medium-term, near-term consolidation is likely.
This is particularly true if the RBNZ remains ‘on hold’ this week and US long yields fail to push on to new highs in yield.
In this regard, US 10-year yields drifted a little lower in the absence of key US data releases overnight. US 10-year yields traded down from 2.41% to 2.39%. Still, the US 2-10s swap curve also remains close to its highs this year, at 152 bps, up from early-Feb lows below 110 bps.
Today’s domestic data releases, while adding to the overall picture of the economy are unlikely to be major market movers. The market has its eyes now firmly on Thursday’sMonetary Policy Statement from the RBNZ.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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The market prices around a 45% chance of a cut at Thursday’s meeting. We do not expect the Bank to deliver, though it may hint, via its published 90-day bank bill track, that rate cuts are possibly later in the forecast period.
Hmmmm - I guess it works like this:
That is the point of a bureaucracy, to stake out itself as the sole arbiter of expertise to head off any challenge before it is ever conceived. In that respect, there is actually no need to be actually successful because you are the one who declares what defines success in the first place; QE will create a beautiful recovery like all previous; no, QE will just create a recovery; no, QE will help the economy limp forward; no, the economy is to blame so QE kept it from being worse. Deflation in monetary policy really has nothing to do with consumer prices and everything to do with the reduction in standards to which monetary “expertise” judges itself. Read more
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