NZ: Short-end rates remain biased lower - ANZ

Research Team at ANZ, notes that NZ’s short-end rates remain biased lower, with market pricing shy of the two OCR cuts by February that they expect.

Key Quotes

“Feedback from investors seen in Asia last week suggests a high degree of suspicion that the RBNZ is genuinely prepared to take the OCR down towards 1%, as implied by the alternative scenarios. This is despite a near-universal expectation that the TWI will hold up (and it has gone higher since the MPS) and lukewarm expectations for Fed policy.

How quickly the Fed lifts policy rates will clearly have an impact, but with the NZ/US policy gap set to close by 75bps over the next six months, we remain bullish NZGS on a spread to the US, and expect the curve to flatten and spreads to narrow once the NZGS 2037 syndication is priced (probably later this week).”