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6 Oct 2015
NZD: Rate cut by RBNZ fully priced in by January 2016 – Westpac
FXStreet (Delhi) - Imre Speizer, Senior Markets Strategist at Westpac, suggests that market expectations for the OCR haven’t changed much during the past few weeks and OIS pricing currently implies around a 36% chance of a rate cut at the RBNZ’s 29 October meeting, with a cut almost fully priced for January.
Key Quotes
“The terminal OCR rate is expected to be 2.44% in June, implying a 24% chance the RBNZ goes below 2.5%. Markets pricing for a sub-2.5% terminal OCR has persisted since the RBNZ opened the door to such at the September MPS.”
“The OIS forward curve illustrates the potential for 2yr swap rates to fall further. Past mid-2016, the curve is pricing a tightening, which we view as extremely unlikely. If the mid-2016 to end-2017 portion of the OIS curve flattens, then the 2yr swap rate should fall further.”
“The market’s forward 3mth bank bill curve tells much the same story. It is even more dovish than the RBNZ’s latest 3mth bank bill forecast out to Sep 2016, but thereafter it is higher.”
Key Quotes
“The terminal OCR rate is expected to be 2.44% in June, implying a 24% chance the RBNZ goes below 2.5%. Markets pricing for a sub-2.5% terminal OCR has persisted since the RBNZ opened the door to such at the September MPS.”
“The OIS forward curve illustrates the potential for 2yr swap rates to fall further. Past mid-2016, the curve is pricing a tightening, which we view as extremely unlikely. If the mid-2016 to end-2017 portion of the OIS curve flattens, then the 2yr swap rate should fall further.”
“The market’s forward 3mth bank bill curve tells much the same story. It is even more dovish than the RBNZ’s latest 3mth bank bill forecast out to Sep 2016, but thereafter it is higher.”